NZD/USD weakens to near 0.5650 on RBNZ rate cut bets
- NZD/USD softens to near 0.5655 in Tuesday’s early European session.
- RBNZ is expected to cut the Official Cash Rate by 25 bps to 2.25% at its upcoming meeting next week.
- Traders await the delayed US NFP report to assess the labor market and its implications for Fed policy.
The NZD/USD pair trades with mild losses around 0.5655 during the early European session on Tuesday. An imminent rate cut from the Reserve Bank of New Zealand (RBNZ) weighs on the New Zealand Dollar (NZD) against the Greenback. All eyes will be on the FOMC Minutes later on Wednesday, ahead of the US September Nonfarm Payrolls (NFP) report.
The RBNZ cut its Official Cash Rate (OCR) by an outsized 50 basis points (bps) to 2.5% in its October meeting, citing a slowing economy and confidence that inflation is under control. This larger-than-expected reduction came in reaction to a 0.9% decline in New Zealand's Gross Domestic Product (GDP) in the second quarter of 2025.
The prospect of the RBNZ's aggressive rate-cutting policy might drag the Kiwi lower in the near term. Data Monday supported expectations that the New Zealand central bank will cut the OCR by 25 bps next week to 2.25% and keep the door open for further cuts. Many economists, including Westpac, BNZ, ASB, and ANZ, anticipated a further 25 bps reduction at the November meeting.
On the other hand, US President Donald Trump removed tariffs on New Zealand exports on more than 200 food products, including beef, amid consumer concerns about rising US grocery prices. It is worth about NZ$2.21 billion ($1.25 billion) annually. This, in turn, might help limit the NZD’s losses.
The release of the US September NFP data will take center stage on Thursday. Economists estimate around 50,000 jobs added in September, following August's 22,000 increase. The Unemployment Rate is projected to stay at 4.3% during the same period. If the report comes in weaker than expected, this could exert some selling pressure on the USD and create a tailwind for the pair.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
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