New Zealand dollar struggles to recover as global tensions and RBNZ policy weigh on sentiment
Written by
Daily Currency Update
The New Zealand dollar (NZD) has made only a tepid recovery attempt from its recent six-month low near 0.5685, with gains stalling in the lower 0.5700s during Friday’s European session. Despite a broadly weaker U.S dollar, the kiwi has remained under pressure, leaving the pair virtually flat on the week and keeping the broader bearish trend intact. The kiwi’s inability to capitalize on U.S dollar softness this week highlights the depth of bearish sentiment surrounding the currency. While the greenback has eased slightly amid shifting expectations around the federal reserve's rate path and mixed economic data, NZD/USD has shown little upward momentum. Much of the kiwi’s underperformance can be attributed to deteriorating global risk sentiment, with rising geopolitical tensions—particularly between the United States and China—dampening investor appetite for risk-sensitive currencies. As a key export partner to China, New Zealand’s economic fortunes are closely tied to demand from Beijing. Any slowdown or trade disruption involving China has an outsized impact on the NZD. This week, markets have been rattled by renewed signs of discord between Washington and Beijing, with escalating rhetoric around trade and technology restrictions threatening to reignite a full-blown trade conflict. Against this backdrop, investors have continued to favor safe-haven assets, leaving the kiwi out of favor. Looking ahead, the near-term outlook for the kiwi remains clouded. Unless there is a notable improvement in global risk sentiment or a rebound in domestic data, the NZD is likely to remain under pressure. Market participants will be watching closely for any signs of easing in U.S China tensions, as well as updates from the RBNZ that could provide clues on the central bank’s forward guidance. For now, the kiwi continues to trade defensively, caught between global uncertainty and a soft domestic economic backdrop—leaving little room for a sustained recovery.Key Movers
The trade tensions between the US and China have really heated up lately, and that’s been pushing the US dollar down a bit. China’s been striking back with some pretty tough moves—they’ve tightened export controls on rare earth minerals (which are super important for lots of tech products), put restrictions on soybean imports from the US, and even effectively banned their companies from doing business with the American side of a big South Korean shipping company called Hanwha Ocean. On the flip side, former President Donald Trump has threatened to double tariffs and stop buying vegetable oil from China altogether. All this back-and-forth isn’t just about politics—it’s starting to make people worry the US economy could slow down. That means the Federal Reserve might have to keep stepping in with easier money policies to help things along. In fact, if you look at the futures market, there’s a growing chance the Fed could cut interest rates by a pretty big 50 basis points either in October or December to give the economy a boost. Fed Chair Jerome Powell has even said that, sooner or later, unemployment is probably going to tick up. Another Fed official, Christopher Waller, has pointed out that the labor market is showing signs of weakness and expects employment to fall. So, it seems like the Fed is getting ready for some tough times ahead and is likely to stay supportive for a while.Expected Ranges
- NZD/USD: 0.5600 - 0.5800 ▼
- NZD/EUR: 0.4800 - 0.5000 ▼
- GBP/NZD: 2.3400 - 2.3600 ▲
- NZD/AUD: 1.1250 - 1.1450 ▼
- NZD/CAD: 0.7900 - 0.8100 ▼