- NZD/USD attracts some sellers to near 0.5880 in the Asian session on Tuesday.
- The US ISM Manufacturing PMI rose to 48.4 in November versus the expected 47.5.
- Trump’s tariff threats continue to undermine the Kiwi.
The NZD/USD pair loses traction to around 0.5880 on Tuesday during Asian trading hours. The New Zealand Dollar (NZD) weakens amid US President-elect Donald Trump’s threats to impose more tariffs. Investors are awaiting US JOLTS job postings for October, which will be released later on Tuesday, along with speeches from Adriana Kugler and Austan Goolsbee of the Federal Reserve (Fed).
Federal Reserve officials on Monday emphasized the need to continue lowering interest rates over the next year, but did not commit to making the next rate cut later this month. Fed Governor Christopher Waller said he is inclined to vote to lower borrowing costs when Fed members meet on December 17-18, but noted that data released before then could support the move. decision to keep rates unchanged.
The Institute for Supply Management (ISM) showed on Monday that US manufacturing improved more than expected in November, but continued to indicate a contraction. The US ISM Manufacturing PMI rose to 48.4 in November from 46.5 in October, beating the expected 47.5.
The Bureau of Labor Statistics will release the Nonfarm Payrolls (NFP) report on Friday, which could offer some clues about the condition of the labor market and the outlook for interest rates in the US. The US economy is expected to add 195,000 jobs in November.
On the Kiwi front, Trump has proposed a 25% tariff on all products from Mexico and Canada and an additional 10% tariff on products from China. The tariffs could lead to a global trade war and could weigh on the NZD, as China is a major trading partner of New Zealand.
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.
