- NZD/USD gains ground to around 0.5980 in the Asian session on Thursday.
- ANZ business confidence rose to 65.7 in October from 60.9 previously.
- Investors await US PCE inflation data on Thursday.
The NZD/USD pair regains some lost ground to near 0.5980 on Thursday during Asian trading hours. New Zealand business confidence and China manufacturing Purchasing Managers’ Index (PMI) data support China’s proxy New Zealand Dollar (NZD).
New Zealand business confidence rose further in October, rising to 65.7 from 60.9 in September, according to a survey by ANZ Bank. Despite the improvement in sentiment, markets expect the Reserve Bank of New Zealand (RBNZ) to cut its official cash rate (OCR) by 75 basis points (bps) at a policy meeting next month. This, in turn, could drag the Kiwi lower against the Dollar.
The latest data released by the National Bureau of Statistics (NBS) on Thursday showed that China’s manufacturing PMI jumped to 50.1 in October, from 49.8 in September. This figure exceeded the expectation of 50.0. Meanwhile, the NBS non-manufacturing PMI improved to 50.2 in October from 50.0 previously, below the consensus of 50.4.
On the USD front, economic readings have pointed to a resilient labor market and economy, prompting traders to reduce their bets on Federal Reserve (Fed) rate cuts. Anticipation that the Federal Reserve (Fed) will proceed with smaller interest rate cuts could boost the dollar and limit the pair’s upside.
Investors will closely monitor the release of US Personal Consumption Expenditure Price Index (PCE) data on Thursday. On Friday, employment data will be in the spotlight. “With the focus more on the jobs data, a strong nonfarm payrolls number would provide the Fed with ammunition for a pause in December,” said Uto Shinohara, senior investment strategist at Mesirow Currency Management in Chicago.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known currency among investors. Its value is largely determined by the health of the New Zealand economy and the policy of the country’s central bank. However, there are some peculiarities that can also cause the NZD to move. The evolution of the Chinese economy tends to move the Kiwi because China is New Zealand’s largest trading partner. The bad news for the Chinese economy will likely mean fewer New Zealand exports to the country, which will affect the economy and therefore its currency. Another factor moving the NZD is dairy product prices, as the dairy industry is New Zealand’s main export. High dairy prices boost export earnings, contributing positively to the economy and therefore the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate of between 1% and 3% over the medium term, with the aim of keeping it close to the midpoint of 2%. To do this, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ raises interest rates to cool the economy, but the move will also drive up bond yields, making investors more attractive to invest in the country and thus boosting the NZD. On the contrary, lower interest rates tend to weaken the NZD. The so-called rate differential, or what rates in New Zealand are or are expected to be compared to those set by the US Federal Reserve, can also play a key role in the movement of the NZD/USD pair.
The release of macroeconomic data in New Zealand is key to assessing the state 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 the NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to raise interest rates if this economic strength is accompanied by high inflation. Conversely, if economic data is weak, the NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during periods of risk appetite, or when investors perceive overall market risks to be low and are optimistic about growth. This usually translates into a more favorable outlook for commodities and so-called “commodity currencies” such as the kiwi. Conversely, the NZD tends to weaken during times of market turmoil or economic uncertainty, as investors tend to sell riskier assets and flee to more stable havens.
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.
