NZD/USD remains below 0.5850 as US Dollar recovers losses
- NZD/USD struggles as the US Dollar recovers intraday losses on technical grounds.
- Traders await Tuesday’s FOMC December Meeting Minutes for insight into the Fed’s 2026 outlook.
- The New Zealand Dollar may gain support as expectations strengthen for an RBNZ rate hike.
NZD/USD remains subdued for the third successive session, trading around 0.5830 during the Asian hours on Monday. The pair edges lower as the US Dollar (USD) recovers daily losses on technical grounds. However, the downside of the pair could be restrained as the US Dollar (USD) could struggle amid the ongoing likelihood of two more rate cuts by the Federal Reserve (Fed) in 2026.
Traders will likely observe the Federal Open Market Committee (FOMC) December Meeting Minutes due on Tuesday, which may shed light on internal policy debates shaping the Fed’s outlook for 2026. The CME FedWatch tool shows an 81.7% probability of rates being held at the Fed’s January meeting, up from 77.9% a week earlier. Meanwhile, the likelihood of a 25-basis-point rate cut has fallen to 18.3% from 22.1% a week ago.
The Federal Reserve lowered the interest rates by 25 basis points (bps) at the December meeting, bringing the target range to 3.50%–3.75%. The Fed delivered a cumulative 75 bps of rate cuts in 2025 amid a cooling labor market and still-elevated inflation.
The NZD/USD pair may also appreciate as the New Zealand Dollar (NZD) could find support from stronger expectations of a rate hike by the Reserve Bank of New Zealand (RBNZ). Recent data showed the economy rebounded in the third quarter, reinforcing signs of a modest recovery after a prolonged period of weakness. RBNZ Governor Anna Breman also noted that interest rates are likely to remain at current levels for some time.
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.
Artigos Recomendados
