- NZD/USD is trading lower near 0.6195 in early Asian session on Thursday.
- US job openings were weaker than expected in July.
- Pessimism over China’s growth weighs on the Kiwi.
The NZD/USD pair lost traction around 0.6195 during the early Asian session on Thursday. Concerns over China’s economic slowdown weighed on the New Zealand Dollar (NZD), which acts as a proxy for China. Traders will be keeping an eye on the release of the US ISM Services Purchasing Managers’ Index (PMI), which is expected later on Thursday.
U.S. job openings fell more than expected in July, adding to a sign of a weakening labor market. The Job Openings and Labor Turnover Survey showed that available positions fell to 7.67 million in July from 7.91 million in June, the lowest level since January 2021.
Traders will closely watch US labor market data on Friday, including Non-Farm Payrolls (NFP) and the Unemployment Rate. The US economy is expected to see 161,000 new job additions in August, while the unemployment rate is projected to decline to 4.2%. Deutsche Bank economists suggested that a weaker NFP reading or a rise in the Unemployment Rate could reinforce market expectations of a 50 basis point rate cut by the Federal Reserve (Fed), which could further weaken the Dollar.
On the Kiwi front, Bank of America Global Research analysts cut China GDP growth forecasts to 4.8% from 5.0%, raising concerns about the economic slowdown. Moreover, China’s Caixin Services PMI was weaker than expected in August, falling to 51.6 from 52.1 in July. The negative outlook around the Chinese economy could limit the pair’s upside 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 policies of the country’s central bank. However, there are some peculiarities that can also cause the NZD to move. Developments in the Chinese economy tend to move the Kiwi because China is New Zealand’s largest trading partner. Bad news for the Chinese economy will likely translate into fewer New Zealand exports to the country, which will affect the economy and therefore its currency. Another factor that moves the NZD is dairy 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 push up bond yields, increasing the attractiveness of investors to invest in the country and thus boosting the NZD. Conversely, lower interest rates tend to weaken the NZD. The so-called rate spread, or how 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.
Macroeconomic data releases in New Zealand are 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 can 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 that overall market risks are low and are optimistic about growth. This often translates into a more favourable 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.
