New Zealand Dollar holds gains above 0.5850 after Chinese inflation data
- NZD/USD drifts higher to near 0.5855 in Wednesday’s early Asian session.
- China's CPI rose 0.8% YoY in August, matching expectations.
- Traders await key US inflation data later this week for fresh impetus.
The NZD/USD pair gathers strength to around 0.5855 during the early Asian trading hours on Wednesday. The New Zealand Dollar (NZD) edges higher against the US Dollar (USD) following Chinese economic data. Traders will keep an eye on the US inflation data later this week.
Data released by the National Bureau of Statistics of China on Wednesday showed that the country’s Consumer Price Index (CPI) climbed 0.8% YoY in August, versus a rise of 0.5% prior. This figure came in line with the market consensus.
On a monthly basis, Chinese CPI inflation rose to 0.4% in August after declining by 0.1% in July, hotter than the 0.3% increase expected. Meanwhile, China’s Producer Price Index (PPI) climbed 3.8% YoY in August, compared to a 3.5% increase in July. The data beat the estimates of 3.7%.
The upbeat Chinese CPI and PPI reports could provide some support to the China-proxy Kiwi, as China is a major trading partners of New Zealand.
Traders await US inflation data for further clues on US monetary policy outlook. The US PPI data will be released on Thursday and CPI readings on Friday.
“The market continues to absorb the stronger-than-expected U.S. jobs report and await upcoming CPI and PPI data, while higher oil prices are stoking inflation concerns and supporting expectations for a September rate hike,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.
Markets are now pricing in about a 59.4% odds of an interest rate hike at the Federal Reserve’s (Fed) policy meeting, according to the CME FedWatch Tool.
RBNZ nudges OCR higher as Commerzbank highlights gradual stimulus withdrawal
Analysts at Commerzbank note that the RBNZ “raised the Overnight Cash Rate (OCR) by 25bp to 2.75% as expected,” framing the move as part of a “gradual removal of monetary stimulus” that the bank deems appropriate “to return inflation sustainably to the target.”
Technical Analysis: NZD/USD retains a neutral tone in the near term
In the daily chart, NZD/USD is consolidating just above the 100-day simple moving average (SMA), which lends nearby trend support, while the Bollinger Bands’ lower band underpins the downside and helps define a broader range. Price, however, remains below the Bollinger Bands’ 20-period SMA, leaving the spot capped within the upper half of the recent band and pointing to a neutral, range-bound near-term bias. The Relative Strength Index (RSI) at 45.6 sits slightly below the 50 line, hinting that bullish momentum has faded without yet signalling oversold conditions.
On the downside, initial support is seen at the 100-day SMA near 0.5845, ahead of the Bollinger lower band around 0.5825, where failure would expose a deeper corrective phase within the broader recovery from prior lows. On the topside, immediate resistance is located at the Bollinger 20-period SMA in the 0.5905 area, with a daily close above that level needed to open the way toward the upper band near 0.5990 and reassert bullish control.
(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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