- NZD/USD loses ground near 0.6340 in the early Asian session on Tuesday.
- The Fed’s Powell said the central bank is in no rush to cut rates quickly, it will be guided by data.
- China’s new stimulus measure could limit the Kiwi’s decline.
The NZD/USD pair is trading on a softer note around 0.6340, breaking the three-day winning streak during the early Asian session on Tuesday. The modest rebound of the US dollar (USD) after the speech of the president of the Federal Reserve (Fed), Jerome Powell, weighs on the pair. Investors will be keeping an eye on the US ISM Manufacturing Purchasing Managers’ Index (PMI) for September, due to be released on Tuesday.
The Fed’s Powell signaled Monday that additional rate cuts are on the horizon, although their size and pace will depend on how the economy develops. Powell further stated that the Fed’s current goal is to support a largely healthy economy and labor market, rather than rescuing a struggling economy or preventing a recession.
Interest rate futures contracts have priced in a nearly 35.4% chance of a half-point cut in November, versus a 64.6% chance of a quarter-point cut, according to the FedWatch tool. of the CME. US labor market data for September will be closely watched on Friday. The US economy is expected to see 140,000 new job additions in September, while the unemployment rate is projected to remain unchanged at 4.2%.
As for the Kiwi, optimism about more stimulus from China could limit the fall of the New Zealand Dollar (NZD). China’s central bank said it will instruct banks to reduce mortgage rates for existing loans by Oct. 31, as part of broad policies to support the country’s battered property market. This, in turn, acts as a tailwind for NZD/USD as China is New Zealand’s largest export partner.
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.
