NZD/USD trades above 0.5600 after rebounding from seven-month lows
- NZD/USD gains as China’s Consumer Price Index rose 0.2% YoY in October.
- China temporarily lifts its ban on exporting dual-use items like gallium, germanium, and antimony to the US.
- Centrist US Senate Democrats agreed on a deal to reopen the government and fund key departments for the next year.
NZD/USD rebounds after reaching a seven-month low of 0.5605 in the previous session, trading around 0.5630 during the Asian hours on Monday. The pair receives support after the release of positive data from China, New Zealand's top trading partner.
China’s Consumer Price Index (CPI) climbed 0.2% year-over-year in October, recovering after a decline of 0.3% in September. The market consensus was for 0% in the reported period. CPI inflation increased 0.2% MoM in October, against 0.1% prior. Producer Price Index (PPI) dropped 2.1% YoY in October, following a 2.3% fall in September. The data came in above the market consensus of -2.2%.
The NZD also receives support from easing United States (US)-China trade tensions. China's Ministry of Commerce said that it would temporarily lift its ban on approving exports of “dual-use items” related to gallium, germanium, antimony, and super-hard materials to the US. The suspension takes effect from Sunday until November 27, 2026.
The upside of the NZD/USD pair could be restrained as the US Dollar (USD) receives support on the possibility of ending the US government shutdown. Bloomberg reported that a group of centrist Senate Democrats agreed to support a deal to reopen the government and fund some departments and agencies for the next year.
The agreement would ensure federal employees receive back pay and allow states to resume delayed federal transfers. It would fund some departments through January 30, while others would receive full-year allocations.
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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