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New Zealand Dollar drifts higher above 0.5950 on US trade uncertainty

  • NZD/USD gains ground to around 0.5965 in Tuesday’s Asian session.
  • Renewed trade uncertainty drags the US Dollar lower. 
  • RBNZ’s Breman hinted at a potential rate hike late in 2026.  

The NZD/USD pair gains momentum to near 0.5965 during the Asian trading hours on Tuesday, bolstered by a weaker US Dollar (USD). US trade policy uncertainty continues to weigh on the Greenback against the New Zealand Dollar (NZD). The US January Producer Price Index (PPI) reports will be the highlights later on Friday.

Renewed uncertainty regarding US trade policies emerges after the US Supreme Court struck down earlier emergency tariffs, prompting President Trump to propose a new 15% global tariff under Section 122 of the Trade Act. 

Additionally, Trump's administration is considering new national security tariffs on a half-dozen industries, per the Wall Street Journal (WSJ) on Monday. The source said that the new tariffs, to be issued under Section 232 of the Trade Expansion Act of 1962, would be separate from a 15% global levy that the US President announced on Saturday. Fresh tariff uncertainty could undermine the Greenback and act as a tailwind for the pair in the near term.

On the other hand, a dovish hold by the Reserve Bank of New Zealand (RBNZ) might cap the upside for the NZD. The New Zealand central bank decided to hold the Official Cash Rate (OCR) at its February policy meeting. During the press conference, RBNZ new Governor Anna Breman signaled an accommodative stance, pushing expectations for the first potential rate hike to late 2026. 

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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Lallalit Srijandorn

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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