NZD/USD remains subdued near 0.5750 following Trade Balance data
- NZD/USD struggles as New Zealand posted a trade deficit of NZD 486 million in January.
- The New Zealand Dollar could face challenges as Governor Orr indicated more rate cuts in the coming months.
- US Initial Jobless Claims rose to 219,000 in the previous week, surpassing the expected 215,000.
NZD/USD holds loses following approximately 1% gains registered in the previous session, trading around 0.5760 during the Asian hours. The New Zealand Dollar (NZD) loses ground following domestic Trade Balance data released on Friday.
New Zealand recorded a trade deficit of NZD 486 million in January 2025, reversing from December’s revised surplus of NZD 94 million (previously NZD 219 million). Goods exports declined to NZD 6.19 billion from NZD 6.67 billion, while imports rose to NZD 6.8 billion from NZD 6.62 billion.
The Reserve Bank of New Zealand (RBNZ) lowered interest rates by 50 basis points to 3.75% during its latest policy meeting on Wednesday, in line with expectations. Reserve Bank of New Zealand (RBNZ) Chief Economist Paul Conway noted on Friday, “Official Cash Rate (OCR) forecasts indicate another 75 basis points (bps) easing.” Governor Adrian Orr indicated earlier that additional rate cuts are likely in the coming months as inflation eases, with policymakers aiming to support the weakening economy.
However, the NZD/USD pair gained ground as the US Dollar (USD) struggled amid weak jobless claims data. US Initial Jobless Claims for the week ending February 14 increased to 219,000, surpassing the expected 215,000. Continuing Jobless Claims also rose slightly to 1.869 million, just under the forecast of 1.87 million.
Additionally, the NZD/USD pair saw gains amid improved market sentiment after US President Donald Trump announced potential progress in trade negotiations with China, easing market concerns over tariffs.
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.