NZD/USD climbs as record US trade surplus boosts Kiwi confidence
- New Zealand posted a record goods trade surplus with the US in April, led by a surge in agricultural exports.
- The US Dollar faces headwinds from Moody’s credit downgrade, high interest rates and growing deficit projections.
- Markets await progress on Trump’s “One Big Beautiful Bill” in the House as a potential USD catalyst.
The New Zealand Dollar (NZD) continues to strengthen against the US Dollar (USD) on Wednesday, with the release of a record trade surplus in April highlighting the largest monthly goods surplus on record with the United States (US).
Amid ongoing concerns about the rising costs of US imports and broader fiscal uncertainty, the positive trade figures from New Zealand have reinforced investor confidence in the Kiwi.
The data underscored the country’s export resilience, particularly in agricultural goods, which accounted for approximately 25% of the YoY increase. This robust performance has prompted traders to favor the NZD as an appealing alternative to the Greenback, offering relative stability and return potential in a time of elevated global uncertainty.
Meanwhile, the US Dollar remains weighed down by multiple headwinds: a recent Moody’s credit downgrade, elevated interest rates and mounting fiscal risks tied to President Donald Trump’s proposal to extend the 2017 tax cuts under his sweeping “One Big Beautiful Bill.” These proposed extensions are projected to widen the US federal deficit by over $3.8 trillion, further amplifying concerns over long-term debt sustainability.
NZD/USD is currently trading near multi-week highs, with technical momentum tilted in favor of further upside. However, near-term direction will likely hinge on developments in Washington, where President Trump is actively pressuring the House of Representatives to approve his bill before the Memorial Day recess. Progress or political roadblocks on this front could influence sentiment around the US Dollar and, in turn, the trajectory of NZD/USD.
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
Tammy Da Costa, CFTe®
FXStreet
Tammy is an economist and market analyst with a deep passion for financial markets, particularly commodities and geopolitics.
