New Zealand Dollar loses its Iran-talks gain after RBNZ hold
- NZD/USD gives back all of its climb on a weaker Dollar and slips toward 0.5600.
- The RBNZ's 4-3 hold at 2.75% leaves it trailing the Euro and the Pound.
- New Zealand's third-quarter jobs data come Tuesday, before the November 7 vote.
The Reserve Bank of New Zealand (RBNZ) still has its rate at 2.75%, and NZD/USD has given back all of its climb on a weaker Dollar. It climbed off a session low just above 0.5600 to just under 0.5650 as the Dollar fell with Crude Oil on US-Iran diplomacy. It's back just above 0.5600, below where the week began.
The RBNZ held on October 28 by four votes to three, with Governor Breman among those voting to hold, in a decision Westpac called a shock to the market. The next decision isn't until December 9, so NZD/USD's rate gap stays at least 1.00 point until then, with the Fed at 3.75%-4.00%.
The RBNZ expects inflation to reach 4.4% by year-end, from 3.7% in September, and it still chose not to hike. The New Zealand Dollar has also fallen against the Australian Dollar, with stronger Australian inflation raising bets on more Reserve Bank of Australia (RBA) hikes. That has left NZD/USD trailing the Euro and the Pound against the Dollar.
On the calendar
New Zealand's third-quarter jobs figures come at 21:45 GMT on Tuesday, with unemployment forecast at 5.5% after 5.6% and employment growth at 0.4% after 0.5%. They're the main New Zealand data before the RBNZ's December 9 decision, and the general election follows on Saturday, November 7.
On Friday, US October Nonfarm Payrolls (NFP) come out at 13:30 GMT, forecast at 65K, with unemployment forecast steady at 4.2%. September job openings come at 15:00 GMT on Tuesday, forecast at 7.13 million after 7.079 million, and both feed the Fed's side of NZD/USD's rate gap.
On the charts
NZD/USD has stayed inside a half-cent band since October 29, the day after the RBNZ's decision. Before that, a climb from the October 14 low just above 0.5550 stopped just short of the 50-day Exponential Moving Average (EMA). That average is near 0.5700 now, with the 200-day just under 0.5800.
NZD/USD 5-minute chart
NZD/USD daily chart
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.