NZD/USD edges lower to near 0.5650 as US government shutdown end in sight
- NZD/USD drifts lower to near 0.5655 in Wednesday’s early Asian session.
- The longest US government shutdown could end as soon as Wednesday.
- New Zealand’s two-year-ahead annual inflation expectation was unchanged at 2.28%.
The NZD/USD pair declines to around 0.5655 during the early Asian session on Wednesday. Optimism over a potential deal to end the US government shutdown provides some support to the US Dollar (USD) against the New Zealand Dollar (NZD). Traders will take more cues from the Fedspeak later on Wednesday.
The funding bill that would end a record government shutdown in US history is headed to the House for a final vote as soon as Wednesday, after the Senate approved it in a 60-40 vote on Monday. If it passes in both chambers of Congress, it will head to US President Donald Trump to be signed into law.
Trump on Monday voiced support for a bipartisan agreement to end the US shutdown, a significant step that makes it likely the government will reopen within days. Hopes of reopening the US government underpin the Greenback and create a headwind for the pair.
Nonetheless, further bets of a rate reduction by the US central bank by year-end might cap the upside for the USD. The markets are now pricing in nearly a 68% possibility that the Federal Reserve (Fed) will cut rates in December, according to the CME FedWatch tool.
Data released by the Automatic Data Processing (ADP) on Tuesday showed that for the four weeks ended October 25, private sector job creation was down more than 11,250 on average per week. The data stands in contrast to the October gains that the firm reported last week, indicating some labor market weakening.
In the fourth quarter (Q4) of 2025, the Reserve Bank of New Zealand’s (RBNZ) monetary conditions survey revealed that New Zealand's two-year inflation expectation remained steady at 2.28% versus 2.28% seen in Q3. The NZ average one-year inflation expectations rose to 2.39% in Q4, compared to 2.37% in Q3.
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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