NZD/USD trades higher above 0.5700 despite RBNZ delivers dovish interest rate outlook
- NZD/USD surrenders some intraday gains but is still positive despite RBNZ’s dovish monetary policy guidance.
- The RBNZ sees two more interest rate cuts in the next two meetings but at a slower pace of 25 bps.
- Investors await FOMC minutes for fresh cues on the monetary policy outlook.
The NZD/USD pair gives up nominal gains after posting an intraday high around 0.5730 in North American trading hours on Wednesday. The Kiwi pair is still more than 0.1% higher after the Reserve Bank of New Zealand’s (RBNZ) monetary policy outcome.
The New Zealand Dollar (NZD) is outperforming its peers even though the RBNZ reduced its Official Cash Rate (OCR) by 50 basis points (bps) to 3.25% and guided a dovish monetary policy outlook. The central bank was already expected to continue easing the monetary policy with a bigger cut due to moderating inflationary pressures and a fragile economic outlook. The RBNZ also reduced its OCR by a larger-than-usual pace of 50 bps in the last two policy meetings.
New Zealand Dollar PRICE Today
The table below shows the percentage change of the New Zealand Dollar (NZD) against listed major currencies today. The New Zealand Dollar was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.19% | 0.18% | -0.30% | 0.17% | 0.11% | -0.11% | -0.03% | |
| EUR | -0.19% | -0.01% | -0.47% | -0.02% | -0.09% | -0.29% | -0.22% | |
| GBP | -0.18% | 0.01% | -0.50% | -0.00% | -0.08% | -0.28% | -0.21% | |
| JPY | 0.30% | 0.47% | 0.50% | 0.47% | 0.40% | 0.18% | 0.26% | |
| CAD | -0.17% | 0.02% | 0.00% | -0.47% | -0.07% | -0.28% | -0.21% | |
| AUD | -0.11% | 0.09% | 0.08% | -0.40% | 0.07% | -0.21% | -0.13% | |
| NZD | 0.11% | 0.29% | 0.28% | -0.18% | 0.28% | 0.21% | 0.07% | |
| CHF | 0.03% | 0.22% | 0.21% | -0.26% | 0.21% | 0.13% | -0.07% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the New Zealand Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent NZD (base)/USD (quote).
RBNZ Governor Adrian Orr said that the board is seeing a lower terminal rate than what it had projected in November. Orr guided two more 25 bps interest rate cuts in the April and May policy meetings.
Meanwhile, the US Dollar (USD) trades higher ahead of the Federal Open Market Committee (FOMC) minutes release for the January meeting, which will be published at 19:00 GMT. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, moves higher to near 107.15.
Investors will pay close attention to the FOMC minutes to get cues about how long the Federal Reserve (Fed) will maintain a restrictive stance on interest rates. The Fed paused the monetary policy expansion cycle last month after reducing interest rates by 100 basis points (bps) in 2024.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.