NZD/USD maintains losses around 0.5650 as Business NZ PSI reports drop

  • The NZD/USD weakened as President Trump announced plans to direct federal agencies to review tariff policies.
  • Investors speculate that Trump’s policies could fuel inflationary pressures, potentially limiting the Fed to just one additional rate cut.
  • New Zealand’s business PSI fell to 47.9 in December from 49.5 in November, extending its streak of contraction to ten consecutive months.

NZD/USD gives back its recent gains from the previous session, trading near 0.5650 during early European hours on Tuesday. The pair experienced volatility as US President Donald Trump’s inauguration day created turbulence in the markets.

The US dollar (USD) appreciated following reports that Trump plans to direct federal agencies to review tariff policies and reassess US trade relations with Canada, Mexico and China.

However, NZD/USD gained some ground as the Dollar came under pressure. This was fueled by Trump’s apparent efforts to strengthen ties with Chinese President Xi Jinping, the TikTok deal and hints of a potentially softer stance on tariffs.

US President Donald Trump stated: “If we do a TikTok deal and China doesn’t approve it, maybe we could impose tariffs on China.” This comment came after he signed an executive order delaying enforcement of the TikTok ban for 75 days. Given the close trading relationship between China and New Zealand, any changes in the Chinese economy could influence New Zealand markets.

Meanwhile, the New Zealand Dollar (NZD) faced downward pressure as Business NZ data reported a drop in the country’s Services Performance Index (PSI). The PSI fell to 47.9 in December from 49.5 in November, marking ten consecutive months of contraction.

Investors will closely monitor Wednesday’s Consumer Price Index (CPI) data as the annual inflation rate is anticipated to fall to its lowest level since 2021. Markets are currently pricing in the probability of The Reserve Bank of New Zealand (RBNZ) is expected to reduce its cash rate from 4.25% to 3.75% next month.

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

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