New Zealand Dollar remains firm above 0.5700 after Chinese services PMI data
- NZD/USD strengthens to near 0.5705 in Friday’s Asian session.
- China’s RatingDog Services PMI eased to 54.1 in June, vs 54.4
- US NFP increased 57,000 in June, well below expectations of a 110,000 rise.
The NZD/USD pair gathers strength to around 0.5705 during the Asian trading hours on Friday. The New Zealand (NZD) remains strong following the Chinese economic data. The US markets will be closed on Friday in observance of Independence Day.
Data released by RatingDog on Friday showed that China's Services Purchasing Managers' Index (PMI) eased slightly to 54.1 in June from 54.4 in May. However, this figure still marked the third-steepest increase in services activity in nearly three years. Services exports grew for a second consecutive month, expanding at the fastest rate since October 2024. The China-proxy Kiwi edges higher following China's PMI report.
On the central bank’s front, ASB Bank dropped its call for a July hike from the Reserve Bank of New Zealand (RBNZ) and expects the RBNZ to keep the Official Cash Rate (OCR) on hold at the upcoming July meeting, followed by steady 25-basis-point increases starting in September, with the OCR peaking at 3.25% by early 2027.
Signs of a cooling US labor market have prompted financial markets to dial back expectations for a near-term interest rate hike from the US Federal Reserve (Fed), weighing on the Greenback against the NZD. Nonfarm Payrolls (NFP) rose by 57,000 jobs in June, the Labor Department's Bureau of Labor Statistics reported on Thursday. Economists had forecast payrolls advancing 110,000.
Meanwhile, the Unemployment Rate fell to 4.2% during the same period, down from 4.3% in May. Financial markets are now pricing in nearly a 52% odds of a US rate hike by September, down from 66% before the jobs data, according to the CME FedWatch tool.
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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