New Zealand Dollar gains on easing risk aversion

NZD/USD holds strong despite New Zealand’s services sector contracting for a fourth straight month as May's PSI dropped to 47.5.
The US Dollar declines as a US-Iran peace deal eases geopolitical tensions, lowering global inflation and interest rate concerns.
Iran stated final talks depend on US compliance, demanding an immediate and complete end to the maritime blockade.

Akhtar Faruqui FXStreet

NZD/USD gains ground after registering minor losses in the previous day, trading around 0.5850 during the Asian hours on Monday. The pair remains stronger as the New Zealand Dollar (NZD) holds ground following the release of domestic economic data.

New Zealand's services sector continues to struggle, as the BusinessNZ Performance of Services Index (PSI) fell to 47.5 in May, down from a revised 48.7 in April. This marks the fourth consecutive month of contraction for the sector.

Concurrently, the broader economy is showing signs of a deeper slowdown. The Performance of Composite Index dropped from a revised 49.2 to 48.4, signaling its third straight month of contraction and its steepest decline since June 2025.

The NZD/USD pair appreciates as the US Dollar (USD) declines after the United States (US) and Iran had reached a deal to end their conflict, easing concerns about inflation and higher interest rates.

Washington and Tehran said on Sunday that they have reached an agreement that will take effect on Friday. US President Donald Trump stated that the US is lifting its naval blockade on Iranian ports and that the Strait of Hormuz will reopen after the agreement is signed.

The United Kingdom (UK), France, Germany ‌and Italy said that the countries were prepared to lift sanctions on Iran in response to steps on its nuclear program after the US and Iran reached a deal to end their war.

Iran's National Security Council confirmed a ceasefire agreement with the US, adding that final deal talks will start after the other party fulfills commitments under the memorandum of understanding. Iranian officials said the maritime blockade against Iran should end immediately and entirely.

New Zealand Dollar FAQs

What key factors drive the New Zealand Dollar?

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.

How do decisions of the RBNZ impact the New Zealand Dollar?

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.

How does economic data influence the value of the New Zealand Dollar?

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.

How does broader risk sentiment impact the New Zealand Dollar?

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.

Author

Akhtar Faruqui

FXStreet

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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