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NZD/USD holds positive ground above 0.5650 after mixed Chinese data

  • NZD/USD trades in positive territory near 0.5675 in Friday’s Asian session. 
  • China’s Retail Sales rose 2.9% YoY in October, stronger than expected. 
  • Analysts believe that the resumption of US economic data will show job market weakness and a potential slowdown.

The NZD/USD pair holds positive ground around 0.5675 during the Asian trading hours on Friday. The New Zealand Dollar (NZD) remains firm against the US Dollar (USD) after the release of the Chinese October Retail Sales and Industrial Production reports. Traders will take more cues from the Federal Reserve (Fed) officials later on Friday, including the Fed’s Lorie Logan and Raphael Bostic.

Data released by the National Bureau of Statistics (NBS) on Friday showed that China’s Retail Sales rose 2.9% YoY in October, compared to 3.0% in September. This figure came in stronger than the expectation of 2.7%. This reading slowed for the fifth straight month in the longest such streak since 2021. Meanwhile, Chinese Industrial Production increased 4.9% YoY in October versus 6.5% prior, below the market consensus of 5.5%. The mixed Chinese data dump has little to no impact on the China-proxy Kiwi. 

An aggressive Reserve Bank of New Zealand (RBNZ) interest-rate cut could weigh on sentiment amid a weakening economy. The RBNZ slashed its Official Cash Rate (OCR) by 50 basis points (bps) to 2.5% in the October meeting, following weaker-than-expected GDP data.

Recent data revealed that the New Zealand Unemployment Rate rose to a near nine-year high of 5.3%, which supports the case for further RBNZ rate reductions. This, in turn, might continue to undermine the NZD against the USD in the near term. 

On the other hand, a prolonged shutdown in US history ended on Thursday after US President Donald Trump signed a funding bill to reopen the government. The reopening will trigger the release of a backlog of economic data, even though the White House said on Wednesday that the Unemployment Rate data for October may never be released. Analysts believe that the resumption of US economic data will reveal US labor market weakness, which might drag the USD lower in the near term. 

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

Lallalit Srijandorn

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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