New Zealand rebounds above 0.5850 on stronger Chinese services PMI
- NZD/USD gains momentum to around 0.5860 in Thursday’s early Asian session.
- China’s RatingDog Services PMI improved to 51.4 in August, stronger than expected.
- Fed Warsh’s speech raises US rate-hike chances.
The NZD/USD pair recovers some lost ground to near 0.5860, snapping the four-day losing streak during the early Asian session on Thursday. The New Zealand Dollar (NZD) strengthens against the US Dollar (USD) following the upbeat Chinese economic data. Traders brace for the US jobs data for August, which will be released later on Friday.
Data released by RatingDog on Thursday showed that China's Services Purchasing Managers' Index (PMI) rose to 51.4 in August from 50.4 in July. This figure came in above the market consensus of 50.6.
Earlier this week, China's NBS Manufacturing PMI improved to 49.8 in August, up from 49.2 in July, stronger than the 49.7 expected. Meanwhile, the NBS Non-Manufacturing PMI held steady at 49.0 in August.
Signs of improvement in the Chinese manufacturing sector provide some support to the China-proxy Kiwi, as China is a major trading partner to New Zealand.
Nonetheless, hawkish remarks from Federal Reserve (Fed) Chair Kevin Warsh at the Jackson Hole meeting have boosted market expectations for a rate hike this month, which could support the Greenback. Last week, Warsh reiterated the Fed’s commitment to its inflation target and indicated policymakers were not yet confident price pressures were easing sufficiently.
Traders of fed funds futures see a 62.3% chance of a quarter-point hike in September, up from around 40% before the speech, according to the CME’s FedWatch tool.
Technical Analysis: NZD/USD keeps a bearish vibe in the near term
In the daily chart, NZD/USD has slipped back under the Bollinger Bands middle line, keeping the near-term tone bearish despite still holding above the 100-day simple moving average (SMA). Price is consolidating just over the lower Bollinger Band, while the Relative Strength Index (14) at 43.4 stays in neutral territory, hinting at fading upside momentum rather than outright oversold conditions.
On the topside, initial resistance appears at the Bollinger Bands middle line near 0.5910, with a stronger cap at the upper band around 0.5990. On the downside, immediate support is provided by the 100-day SMA at 0.5845, followed by the lower Bollinger Band at 0.5825, where a break would likely expose a deeper retracement within the broader downtrend.
(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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