NZD/USD continues to rise for the second session in a row, reaching a level of around 0.6060 during European hours on Thursday. The pair is maintaining its gains as the New Zealand dollar (NZD) gets support from cautious sentiment ahead of next week’s policy decision from the Reserve Bank of New Zealand (RBNZ), with the central bank widely expected to leave interest rates unchanged.
Investors are likely to look at the RBNZ’s inflation expectations for the first quarter of 2026, which will be published on Friday. Attention will focus on the Consumer Price Index (CPI) report, which will be the most essential event later in the session in North America.
The NZD/USD pair holds its ground while the US dollar (USD) remains feeble despite rising expectations that the Fed will leave interest rates unchanged following stronger-than-expected US labor market data.
CME’s FedWatch tool suggests that financial markets are now pricing in a nearly 92% probability that the Fed will leave interest rates unchanged at its next meeting, up from 80% a day earlier. Markets expect the first cut probably in June, and the next one in September.
January non-farm payrolls (NFP) data rose by 130,000 in January, following a revised escalate of 48,000 in December (previously 50,000), and beat market expectations of 70,000. Meanwhile, the unemployment rate fell to 4.3% from 4.4%.
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 escalate 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 robust 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 feeble, 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 safe and sound havens.
