NZD/USD holds gains above 0.5700 following China’s NBS PMI data

NZD/USD holds ground as China’s NBS Manufacturing PMI rose to 50.4 in March.
A WSJ report suggests Trump is open to end the Iran war without reopening Hormuz.
The US Dollar may rebound as Middle East tensions boost safe-haven demand amid rising uncertainty.

Akhtar Faruqui FXStreet

NZD/USD halts its five-day losing streak, trading around 0.5730 during the Asian hours on Tuesday. The pair remains stronger as the New Zealand Dollar (NZD) remains stronger following the release of China’s NBS Purchasing Managers’ Index (PMI) data. Changes in China’s economy can influence the NZD, given the close trade relationship between the two countries.

China’s NBS Manufacturing PMI rose to 50.4 in March from 49.0 in February, beating expectations of 50.1 and returning to expansion, marking the strongest reading since March last year after two months of contraction. Meanwhile, the Non-Manufacturing PMI increased to 50.1 from 49.5, above forecasts of 49.9, signaling stabilization in the services sector following two months of contraction.

The NZD/USD pair gained ground as the US Dollar (USD) lost ground after five consecutive days of gains. However, the Greenback may recover its daily losses amid rising safe-haven demand linked to uncertainty surrounding the Middle East tensions.

The Wall Street Journal (WSJ) reported that US President Donald Trump is open to ending the Iran war without reopening the Strait of Hormuz, signalling shifting priorities. However, continued US troop deployments point to mixed messaging and persistent risks to global energy flows.

Federal Reserve (Fed) Chair Jerome Powell noted on Monday that long-term US inflation expectations remain well anchored despite heightened Middle East uncertainties and emphasized that the Federal Reserve policy stance allows officials to evaluate the economic impact of the Iran conflict.

New York Fed President John Williams said that monetary policy is well-positioned for any unusual circumstances and told Reuters that the job market is still sending mixed signals on Monday.

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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