- NZD/USD falls to 0.5545 in the early Asian session on Monday.
- The manufacturing PMI Caixin de China fell to 50.1 in January compared to the expected 50.5.
- The fear of an escalation of the commercial war drives the USD and creates a wind against for the pair.
The NZD/USD faces some sale pressure to about 0.5545 during the Asian negotiation hours on Monday. The New Zealand dollar (NZD) weakens as commercial tensions increase after the announcement of tariffs by the US president, Donald Trump, and the PMI manufacturing Caixin manufacturing of China was weaker than expected in January.
Trump imposed tariffs on Canada, Mexico and China, which will take effect on Tuesday. The countries immediately promised retaliation measures, and China said it would challenge Trump’s tariffs in the World Trade Organization (WTO). The feeling of risk aversion and concern for the commercial war drives safe refuge flows and act as a wind against the pair.
The data published by Caixin Insight Group and S&P Global on Monday showed that the Purchase Management Index (PMI) China’s manufacturing fell to 50.1 in January. This reading was weaker than expected and the previous reading of 50.5. The Kiwi remains weak in an immediate reaction to China’s discouraging economic data, since China is an important commercial partner for New Zealand.
The perspective of more rates cuts by the New Zealand Reserve Bank (RBNZ) could further weigh about the New Zealand dollar (NZD). “In line with the orientation of the RBNZ, the markets continue to imply another rate cut of 50 basic points up to 3.75% at the February 19 meeting and that the policy rate reaches a minimum of 3.00% in the next 12 months, “BBH FX analysts said.
New Zealand Faqs dollar
The New Zealand dollar (NZD), also known as Kiwi, is a well -known currency among investors. Its value is largely determined by the health of the neozyous economy and the policy of the country’s central bank. However, there are some peculiarities that can also make the NZD move. The evolution of the Chinese economy tends to move Kiwi because China is the largest commercial partner in New Zealand. The bad news for the Chinese economy is probably translated into less neozyous exports to the country, which will affect the economy and, therefore, its currency. Another factor that moves the NZD is the prices of dairy products, since the dairy industry is the main export of New Zealand. The high prices of dairy products boost export income, contributing positively to the economy and, therefore, to the NZD.
The New Zealand Reserve Bank (RBNZ) aspires to reach and maintain an inflation rate between 1% and 3% in the medium term, with the aim of keeping it near the midpoint of 2%. To do this, the Bank sets an adequate level of interest rates. When inflation is too high, RBNZ rises interest rates to cool the economy, but the measure will also raise bond performance, increasing the attractiveness of investors to invest in the country and thus boosting the NZD. On the contrary, lower interest rates tend to weaken the NZD. The differential type of types, or how they are or is expected to be the types in New Zealand compared to those set by the Federal Reserve of the US, can also play a key role in the NZD/USD movement.
The publication of macroeconomic data in New Zealand is key to evaluating the status of the economy and can influence the valuation of the New Zealand dollar (NZD). A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and can encourage the New Zealand reserve bank to increase interest rates, if this economic strength is accompanied by high inflation. On the contrary, if the economic data is weak, the NZD is likely to depreciate.
The New Zealand dollar (NZD) tends to strengthen during periods of appetite for risk, or when investors perceive that the general market risks are low and are optimistic about growth. This usually translates into more favorable perspectives for raw materials and the so -called “raw material currencies”, such as Kiwi. On the contrary, the NZD tends to weaken in times of turbulence in markets or economic uncertainty, since investors tend to sell the most risky assets and flee the most stable shelters.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
