NZD/USD rebounds to near 0.6050 as US Dollar pares recent gains
- NZD/USD appreciates as the US Dollar pares its recent gains from the previous two sessions.
- The New Zealand Dollar strengthened on expectations that the RBNZ will start raising interest rates later this year.
- The Greenback may regain ground as 10-year Treasury yields hover near 4.27% after a sharp prior rise.
NZD/USD recovers losses registered in the previous two consecutive sessions, trading around 0.6050 during the European hours on Tuesday. The pair rebounds as the US Dollar (USD) struggles after two days of gains.
However, the upside of the NZD/USD pair could be limited as the US Dollar may regain its ground, receiving support as the yield on the 10-year US Treasury bond hovered near 4.27% on Tuesday after a nearly 1% rise in the prior session, underpinned by strong US economic data and shifting Federal Reserve (Fed) policy expectations toward hawkish.
Monday’s release showed an unexpected rebound in US factory activity, underscoring economic resilience, as the Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index (PMI) rose to 52.6 from 47.9 in December, beating market expectations of 48.5.
The NZD/USD pair remains stronger despite Stats NZ data showing seasonally adjusted Building Permits fell 4.6% month-over-month (MoM) in December 2025, reversing a downwardly revised 2.7% rise in November.
The New Zealand Dollar (NZD) strengthened against the US Dollar (USD) on expectations that the Reserve Bank of New Zealand (RBNZ) will begin raising interest rates later this year. The central bank’s first policy meeting is scheduled on February 18 under new RBNZ Governor Anna Breman, who is likely to outline her policy direction.
Traders await labor market data due on Wednesday, with the Q4 Unemployment Rate seen holding at 5.3%, the highest since 2016, while Employment is expected to increase 0.3%.
Sentiment was also supported by upbeat data from China, New Zealand’s largest trading partner, after a private survey showed mainland manufacturing expanded at its fastest pace in three months. China’s RatingDog Manufacturing Purchasing Managers' Index (PMI) edged up to 50.3 in January from 50.1 in December, matching expectations and marking the strongest expansion since October.
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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