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: 2025.05.05
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NZD/USD rises above 0.5950 due to softer US Dollar, US-China trade talks in focus
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NZD/USD rises above 0.5950 due to softer US Dollar, US-China trade talks in focus
New
2025.05.05 13:50
2025.05.05 13:50
2025.05.05 13:50
- NZD/USD continues to gain traction as the US Dollar loses ground, with traders keeping a close eye on ongoing US-China trade developments.
- President Trump commented on tariffs, raising concerns for US companies contemplating the shift of production back from China.
- A potential uptick in the unemployment rate in New Zealand could bolster expectations for additional monetary easing by the RBNZ.
The NZD/USD pair continues to climb for the second straight session, trading near 0.5970 during Monday's Asian hours. The Kiwi pair gains momentum as the US Dollar (USD) weakens, with traders closely monitoring developments in US-China trade relations.
Over the weekend, US President Donald Trump confirmed that trade negotiations were ongoing, although he clarified that no direct talks with Chinese President Xi Jinping are scheduled for this week. On Friday, China's Commerce Ministry indicated it is reviewing a US proposal to restart trade discussions.
Trump's latest remarks on tariffs have also caught market attention, particularly for US companies considering reshoring production from China. Speaking on Sunday, he acknowledged the economic impact of steep tariffs, stating, "At some point, I'm going to lower them, because otherwise, you could never do business with them, and they want to do business very much."
Meanwhile, Friday's US Nonfarm Payrolls (NFP) report showed the economy added 177,000 jobs in April--beating expectations of 130,000, though down from a revised 185,000 in March. The unemployment rate held steady at 4.2%, and average hourly earnings grew 3.8% year-over-year, matching the previous month.
In New Zealand, attention shifts to upcoming labor market data, with forecasts pointing to a rise in the unemployment rate. Such an outcome could reinforce expectations of further monetary easing by the Reserve Bank of New Zealand (RBNZ). Markets have fully priced in a 25 basis point rate cut at the RBNZ's meeting later this month, with interest rates projected to bottom out at 2.75% by 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.
Last updated
: 2025.05.05
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