NZD/USD weakens to near 0.5950 on RBNZ dovish hold, focus shifts to US economic data

NZD/USD softens to near 0.5960 in Friday’s early Asian session.
RBNZ’s Breman said the path is bumpy, but inflation is seen back in the target range in Q1.
Traders brace for key US economic data later on Friday for more clues on the interest rate path.

Lallalit Srijandorn FXStreet

The NZD/USD pair attracts some sellers to around 0.5960 during the Asian trading hours on Friday. The New Zealand Dollar (NZD) weakens against the US Dollar (USD) following a dovish hold by the Reserve Bank of New Zealand (RBNZ). Traders brace for the key US economic data later on Friday for fresh impetus.

The New Zealand central bank decided to hold the Official Cash Rate (OCR) at its February policy meeting. This was the first-rate decision under new Governor Anna Breman. She pushed expectations for the next potential rate hike to late 2026 or early 2027.

Breman said on Thursday that the path to 2% inflation has been bumpy, but the central bank expects inflation to already be back in its target range in the first quarter of this year. A dovish hold by the RBNZ could weigh on the Kiwi against the USD in the near term.

On the USD’s front, hawkish Federal Reserve (Fed) minutes and stronger-than-expected economic data provide some support to the Greenback. Data released by the US Department of Labor (DOL) on Thursday showed that the number of US citizens submitting new applications for unemployment insurance declined to 206K for the week ending February 14. This figure came in lower than the market consensus of 225K and down from the previous week’s revised 229K.

The preliminary reading of the US Gross Domestic Product (GDP) for the fourth quarter (Q4) and the Personal Consumption Expenditures (PCE) data will be in the spotlight later on Friday. If the reports come in worse than expected, this could undermine the USD and cap the downside for the pair.

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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