NZD/USD holds losses below 0.5750 ahead of China trade data
|- NZD/USD falls despite New Zealand’s November building permits rising 2.8% MoM, reversing October’s decline.
- China’s Trade Surplus is seen widening to $113.6B, with exports up 3.0% YoY and imports rising 0.9%.
- Softer US inflation suggests the Federal Reserve may cut interest rates as currently priced by markets.
NZD/USD extends its losses for the second successive day, trading around 0.5730 during the Asian hours on Wednesday. The pair depreciates as the New Zealand Dollar (NZD) faces challenges following the release of domestic seasonally adjusted Building Permits, which rose 2.8% month-over-month (MoM) in November 2025, reversing an upwardly revised 0.7% decline in October.
Traders will likely observe the Trade Balance data for December later in the day from China, New Zealand’s close trading partner. Trade balance is expected to widen to $113.60B in December, compared to $111.68B in the previous reading. Exports are expected to rise by 3.0% YoY in December, while Imports are projected to increase by 0.9% YoY during the same period.
The NZD/USD pair also loses ground as the US Dollar (USD) gains ground despite the latest inflation in the United States (US) being benign, hinting that the Federal Reserve could indeed reduce interest rates as priced in by the financial markets.
US Core Consumer Price Index (CPI), excluding food and energy, rose 0.2% in December, below market expectations, while annual core inflation held at 2.6%, matching a four-year low. The data provided a clearer sign of easing inflation after earlier releases were skewed by shutdown effects. However, last Friday’s strong Nonfarm Payrolls report, a dip in the Unemployment Rate, and a solid four-week average ADP Employment Change point to a resilient labor market.
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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