New Zealand Dollar edges higher to near 0.5850 ahead of US PPI inflation data
- NZD/USD edges higher to near 0.5845 in Thursday’s early Asian session.
- The US August PPI inflation report will be published on Thursday.
- RBNZ cautious outlook could weigh on the Kiwi.
The NZD/USD pair gathers strength to around 0.5845 during the early Asian session on Thursday, bolstered by a softer US Dollar (USD). All eyes will be on the upcoming Producer Price Index (PPI) data due on Thursday.
Traders will keep an eye on the US inflation data later this week, which could shed fresh light on the Federal Reserve’s (Fed) next steps at their September 14-15 meeting. Economists expect the headline PPI to rise by 5.3% YoY in August, while the core PPI is projected to show an increase of 4.6% in August. In case of a stronger-than-expected US PPI reading, this could reinforce the Fed rate hike and lift the Greenbsck.
“A hot CPI print would all but seal a September hike and underpin a firmer dollar,” said Elias Haddad at Brown Brothers Harriman & Co. “A cooler reading would strengthen the case for a hold and leave the dollar vulnerable to a dovish Fed repricing.”
The Reserve Bank of New Zealand (RBNZ) said that the current rate remains accommodative, and the bank is focused on a "gradual removal of monetary stimulus". Economists widely expect at least one more rate hike before the end of the year, likely in December. The RBNZ’s cautious tone and forward guidance have dampened market expectations for an aggressive tightening cycle.
"It's possible the RBNZ's view won't have shifted that much. We tend to think there won't be much of a shift in the RBNZ's OCR forecasts given the significant uncertainties at present,” said ANZ chief economist Sharon Zollner.
RBNZ lifts OCR as Commerzbank highlights data-dependent tightening path
Analysts at Commerzbank note that the RBNZ “raised the Overnight Cash Rate (OCR) by 25bp to 2.75% as expected,” with policymakers stating that “a gradual removal of monetary stimulus was appropriate to return inflation sustainably to the target.” Commerzbank adds that the central bank “stressed that the future rate path is not pre-determined,” indicating that “further tightening is possible but will depend on the persistence of inflation and the strength of the recovery.”
Technical Analysis: NZD/USD keeps a bullish vibe above the 100-day SMA
In the daily chart, NZD/USD holds just above the 100-day moving average at 0.5843 while remaining capped well below the Bollinger Bands’ 20-period simple moving average around 0.5906, which keeps the near-term tone broadly range-bound. The pair is consolidating in the lower half of the recent Bollinger envelope, with the Relative Strength Index (14) hovering near 44, hinting at subdued downside momentum rather than a decisive bearish extension.
On the downside, immediate support emerges at the 100-day moving average near 0.5845, with the Bollinger lower band reinforcing a broader floor around 0.5820 if selling pressure resumes. On the topside, initial resistance is seen at the Bollinger midline around 0.5905, and a daily close above this barrier would expose the upper band near 0.5990, where bulls could meet a stronger supply zone.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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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