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: 2025.03.06
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NZD/USD refreshes weekly high near 0.5750 as China promises additional stimulus
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NZD/USD refreshes weekly high near 0.5750 as China promises additional stimulus
New
2025.03.06 19:30
2025.03.06 19:30
2025.03.06 19:30
- NZD/USD refreshes weekly high near 0.5750 as the New Zealand Dollar strengthens after Chinese officials left the door for additional monetary stimulus.
- PBOC Pan Gongsheng indicated that more interest rate cuts are on the table.
- Easing Trump tariff fears have diminished the risk premium of the US Dollar.
The NZD/USD pair posts a fresh weekly high to near 0.5750 in Thursday's European session. The Kiwi pair exhibits strength as Chinese officials have promised to provide additional stimulus over fiscal spending announced in the government's annual work report released on Wednesday.
China's Finance Minister Lan Foan said that the government has left doors open for more stimulus if officials see the economy failing to meet the Gross Domestic Product (GDP) target of 5%. Additionally, People's Bank of China Governor Pan Gongsheng reiterated a dovish stance on interest rates. We will cut interest rates and Reserve Requirement Ratio (RRR) "at an appropriate time", Gongsheng said.
On Wednesday, the Chinese government guided a proactive fiscal policy approach and announced that the government will issue 1.3 trillion Chinese yuan (CNY) in ultra-long special T bonds in 2025.
The scenario of an Improvement in China's economic outlook accelerates the appeal of the New Zealand Dollar (NZD), knowing that the Kiwi economy relies heavily on exports to China.
Meanwhile, a significant weakness in the US Dollar (USD) has meaningfully contributed to strength in the Kiwi pair. The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, slumps to near 104.00, the lowest level seen in four months.
The US Dollar weakens as investors expect United States (US) President Donald Trump's tariff agenda won't be much more disruptive than what they had anticipated earlier. On Wednesday, the White House reported that the President will provide a one-month exemption from 25% tariffs on automobiles from Canada and Mexico, which were imposed on Tuesday.
Going forward, investors will focus on the US Nonfarm Payrolls (NFP) data for February, which will be published on Friday.
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.
Last updated
: 2025.03.06
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