New Zealand Dollar recovers from two-week low as fading Fed hike bets undermine USD
- NZD/USD attracts some buyers during the Asian session and moves away from a two-week low.
- Receding Fed rate-hike bets keep USD bulls on the defensive and act as a tailwind for spot prices.
- The US-Iran standoff keeps geopolitical risks in play and helps limit losses for the safe-haven USD.
The NZD/USD pair is seen building on the previous day's bounce from the 0.5820 region, or a two-week low, and gaining some positive traction during the Asian session on Friday. Spot prices climbed back above 0.5850 in the last hour and, for now, seem to have snapped a four-day losing streak.
The US Consumer Price Index (CPI) and the Producer Price Index (PPI) report pointed to signs of cooling inflation, forcing traders to pare expectations for an immediate rate hike by the US Federal Reserve (Fed). This keeps US Dollar (USD) bulls on the defensive, which, in turn, is seen as a key factor supporting the NZD/USD pair. However, the US-Iran standoff acts as a tailwind for the safe-haven buck and holds back traders from placing aggressive directional bets.
US Treasury Secretary Scott Bessent said on Thursday that Washington is going to apply measures that have never been seen on Iran. On the other hand, senior IRGC adviser Mohammad Reza Naqdi said that Tehran's strategy is to make any conflict so costly that future US administrations think twice before taking military action against Iran. Moreover, rising tensions over the Strait of Hormuz keep the war risk premium in play and offer support to the greenback.
In fact, President Donald Trump again claimed that the US has total control over the strategic waterway, while Iran has pledged to keep the strait closed until all its demands are met. Moreover, Iran-backed Houthis in Yemen escalated attacks on vessels in the Red Sea and Bab el-Mandeb Strait, targeting Saudi ships. This should limit the downside in crude oil prices, which has been fueling inflation fears and keeps bets for at least one Fed rate hike in 2026 on the table.
Furthermore, a survey from the Reserve Bank of New Zealand (RBNZ) showed inflation expectations easing in the third quarter, slipping to 2.34% from 2.53% previously. This gives the central bank less reason to tighten further, which should contribute to capping the upside for the Kiwi and the NZD/USD pair. Hence, it will be prudent to wait for strong follow-through buying before traders position for any further appreciating move for the currency pair.
NZD/USD daily chart
Technical Analysis
The NZD/USD pair defended the 100-day Simple Moving Average (SMA) at 0.5827, which keeps the near-term tone mildly bullish. A daily close back below this level, however, would hint at a loss of bullish momentum and expose the recent lows around the mid-0.5700s, while holding above it keeps the bias tilted toward further grinding gains in the sessions ahead.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
