The NZD/USD pair remains low during Asian hours on Tuesday, and at the time of writing it was trading around 0.6030. The pair is losing ground as the New Zealand dollar (NZD) maintains losses after Statistics NZ reported that the food price index rose 2.5% month-on-month (MoM) in January, the biggest monthly enhance in four years. Annual food inflation accelerated to 4.6% from 4.0% in December, with all subgroups posting gains.
Traders remain cautious ahead of Wednesday’s Reserve Bank of New Zealand (RBNZ) policy meeting. While the central bank is widely expected to keep the interest rate at 2.25%, some market participants are anticipating potential rate increases later in the year, likely in September and October.
The NZD/USD pair is also weighed down by the stronger US dollar (USD), which is gaining in value for the second session in a row. Still, the dollar could face challenges as weaker January data on the U.S. Consumer Price Index (CPI) reinforced expectations that the Federal Reserve (Fed) could start cutting interest rates later this year. Traders are now waiting for Fed meeting minutes, fourth-quarter GDP data and the core PCE price index for clearer signals about the monetary policy outlook.
Meanwhile, January’s U.S. nonfarm payrolls data saw the biggest gain in over a year, and the unemployment rate unexpectedly dropped, indicating stabilization in the labor market. Sentiment remains cautious, however, as the Fed’s preferred inflation measure, the Personal Consumer Expenditures Price Index (PCE), continues to hover closer to 3% than its 2% target, and disinflation progress since mid-2025 has been uneven.
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 condition of the New Zealand economy and the policy of the country’s central bank. Still, there are some unique features that can also cause the NZD to move. The performance of the Chinese economy tends to move Kiwis because China is New Zealand’s largest trading partner. Bad news for the Chinese economy is likely to mean fewer New Zealand exports to the country, which hits the economy and therefore the currency. Another factor influencing NZD is dairy prices, as the dairy industry is New Zealand’s main export. High dairy product prices enhance export earnings, positively impacting the economy and therefore NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate of 1% to 3% over the medium term, with particular emphasis on keeping it close to the average level of 2%. For this purpose, the bank sets the appropriate level of interest rates. When inflation gets too high, the RBNZ will raise interest rates to cold the economy, but this move will also push up bond yields, making it more attractive for investors to invest in the country and therefore strengthening New Zealand’s currency. On the contrary, lower interest rates tend to weaken NZD. The so-called interest rate differential, which is how New Zealand rates are or are expected to be compared to those set by the US Federal Reserve, could also play a key role in the movement of the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assessing the state of the economy and may impact the valuation of the New Zealand dollar (NZD). NZD is well served by a sturdy economy, underpinned by high economic growth, low unemployment and high confidence. High economic growth attracts foreign investment and may prompt the Reserve Bank of New Zealand to raise interest rates if this economic strength is accompanied by increased inflation. Conversely, if economic data is tender, NZD will likely lose value.
The New Zealand dollar (NZD) tends to strengthen during periods of increased risk or when investors perceive that broader market risk is low and are positive about growth. This tends to lead to a more favorable outlook for commodities and so-called “commodity currencies” such as the kiwi. On the other hand, NZD tends to weaken during periods of market turmoil or economic uncertainty as investors tend to sell higher risk assets and flee to more stable unthreatening havens.
