NZD/USD climbs above 0.5800 as risk appetite increases
- NZD/USD strengthens on risk-on sentiment amid easing US–Venezuela tensions.
- The US Dollar weakens after ISM Manufacturing PMI fell to 47.9 for a third straight month.
- The New Zealand Dollar is supported by a cautious outlook for RBNZ policy.
NZD/USD extends its gains for the third successive session, trading around 0.5810 during the early European hours on Tuesday. The risk-sensitive pair gains ground amid easing concerns about a broader geopolitical escalation.
The United States (US) launched a large-scale military strike against Venezuela on Saturday and captured Venezuelan President Nicolas Maduro and his wife. Bloomberg reported on Monday that Maduro pleaded not guilty to US charges in a narco-terrorism case, setting the stage for an unprecedented legal battle with major geopolitical implications.
The NZD/USD pair appreciated as the US Dollar (USD) faced challenges after a disappointing manufacturing survey. The US ISM Manufacturing Purchasing Managers’ Index (PMI) declined for a third consecutive month, dropping to 47.9 in December 2025, the lowest since October 2024, from 48.2 in November and below the expected 48.3. The data indicate a faster contraction in US manufacturing activity, driven by declines in production and inventories.
Traders are awaiting a series of key US economic releases this week, including the Nonfarm Payrolls (NFP) report, for signals on the monetary policy outlook. The consensus forecast sees NFP rising by 55,000 jobs.
The New Zealand Dollar (NZD) is supported by a cautious tone surrounding the Reserve Bank of New Zealand’s (RBNZ) policy outlook. Policymakers have signaled the easing cycle likely ended last year after 225 basis points (bps) of rate cuts, while pushing back against expectations of near-term rate hikes. Governor Ann Breman has said rates are likely to stay on hold for an extended period unless there are surprises.
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
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.
