NZD/USD price action: Why is the NZD attracting buyers?

The NZD/USD has gained due to China's economic stimulus and trade ties, but its future depends on New Zealand's monetary policy, China's growth, and the dollar's strength amid a strong US outlook for 2025.

new zealand dollar and flag
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Bridgette Laszlo
Content Strategist, Chicago

Key points

  • NZD/USD rises to 0.5631, recovering from last week's low of 0.5542
  • China's economic measures boost NZD due to strong trade ties
  • PBOC maintains liquidity and Yuan stability, supporting kiwi outlook
  • Traders watch Reserve Bank of New Zealand for future rate decisions
  • US dollar's strength remains a factor with a strong 2025 economic outlook

NZD/USD gains momentum

The New Zealand dollar has seen some relief against the dollar this week, hitting highs of 0.5631. This marks a solid recovery for the kiwi, after sinking to lows last Friday of 0.5542. As the currency continues to stabilize, traders will likely be attentive to upcoming policy decisions by the Reserve Bank of New Zealand and global market conditions to gauge future movements.

China’s economic strength fuels kiwi

China’s latest economic stimulus efforts can be linked to the recent strength in the kiwi-dollar pair. New Zealand's strong trade ties with China means that changes in China's economic landscape can have a relevant impact on antipodean markets. People's Bank of China (PBOC) Governor Pan Gongsheng declared that interest rate adjustments and reserve requirement ratios will be used to ensure ample liquidity. He also confirmed China's goal to increase its fiscal deficit to reinforce its role as a major global economic driver. Additionally, PBOC Deputy Governor Xuan Changneng stated that the central bank will continue its aim to keep the Yuan's exchange rate stable, by preventing excessive fluctuations and ensure currency stability.

Strong US economic outlook for 2025 despite dollar pausing rally

The dollar index hovered around 109.6 on Tuesday, taking a breather from its recent rally to 110. This softening came after the Producer Price Index (PPI) report showed US producer prices rose less than anticipated last month, a 0.2% increase. Core PPI remained steady and below expectations, with annual rates growing to 3.3% and 3.5%.

A Bloomberg report suggested the Trump administration might implement tariffs gradually, month-by-month, offering temporary relief to investors, despite initial declarations of sweeping tariffs. Despite this, the dollar continues to near its October 2022 highs, as traders anticipate fewer Federal Reserve rate cuts this year, with expectations narrowing to one quarter-point cut, likely later in the year. The dollar experienced the most weakness against the British pound but held firm against the yen.

What’s next for NZD/USD?

The recent NZD uptrend is largely influenced by China's economic stimulus measures, which have strengthened New Zealand’s trade outlook given their close trading relationship. The People's Bank of China's efforts to maintain liquidity and stabilize the Yuan further support the optimism for New Zealand's exports.

However, the future direction of the NZD/USD pair remains uncertain and will be influenced by multiple factors. Traders are focused on upcoming decisions by the Reserve Bank of New Zealand, as any signs of further rate cuts could impact the kiwi's strength. Additionally, although the US dollar has recently paused its rally, it remains supported by a strong US economic outlook for 2025 and anticipated gradual Federal Reserve rate cuts, which could exert pressure on the kiwi.

Therefore, the NZD/USD pair's trajectory will depend on the balance between New Zealand’s domestic policies, China's economic performance, and the US dollar's movements. Sustained economic growth in China and cautious adjustments by New Zealand's central bank could support the kiwi, but strong US economic conditions and limited rate cuts might continue to bolster the dollar, creating a dynamic trading environment for the pair.

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Reviewed by:
Frank Kaberna
Director of Strategy, Chicago