NZD/USD attracts some sellers below 0.5900 despite stronger China’s Caixin Manufacturing PMI data

NZD/USD softens to near 0.5895 in Monday’s European session.
China's Caixin Manufacturing PMI grew more than expected in November.
The US ISM Manufacturing PMI is due later on Monday.

Lallalit Srijandorn FXStreet

The NZD/USD pair trades on a softer note around 0.5895 on Monday during the Asian trading hours. The expectation of another rate cut by the Reserve Bank of New Zealand (RBNZ) in February 2025 and Trump tariff threats continue to undermine the pair. The US ISM Manufacturing Purchasing Managers' Index (PMI) for November will be in the spotlight later on Monday.

The RBNZ Governor Adrian Orr hinted during the press conference last week that another double cut would be possible in February 2025, citing the context of growth in New Zealand. This, in turn, drags the Kiwi lower against the US Dollar (USD) for the time being. Furthermore, Trump has pledged a 25% tariff on all products from Mexico and Canada and an additional 10% tariff on goods from China. The tariffs could lead to a global trade war and may impact the New Zealand economy as China is New Zealand's largest trading partner.

Data released by Caixin Insight Group and S&P Global showed on Monday that the Chinese Manufacturing PMI rose to 51.5 in November versus 50.3 in October, beating the estimation of 50.5. However, the upbeat economic data failed to boost the NZD against the USD amid the cautious mood.

Traders await the fresh catalysts from the US ISM Manufacturing PMI data on Monday, which is forecasted to improve to 47.5 in November from 46.5 in October. Later this week, the Fed speakers might offer some hints about the US interest rate policy outlook, along with the US employment report for November.

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

Lallalit Srijandorn

FXStreet

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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