Kiwi dollar slips for third day amid strong US dollar and China growth concerns
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Daily Currency Update
The New Zealand dollar (NZD) extended its decline on Friday, marking its third consecutive daily loss and a weekly drop of around 0.45%. The Kiwi faced renewed selling after failing to sustain gains above the 0.5800 level earlier in the week, as global and domestic factors combined to dampen investor sentiment. A stronger US dollar has been the main drag on the NZD, supported by a hawkish tone from the Federal Reserve (Fed). Recent comments from Fed officials reinforced expectations that interest rates in the United States will remain elevated for longer, prompting investors to favour the greenback over risk-sensitive currencies like the Kiwi. The shift in sentiment has coincided with a rise in US Treasury yields, further underpinning the USD’s strength. Adding to the pressure, weak economic data from China—New Zealand’s largest trading partner—has weighed on market confidence. A softer manufacturing reading highlighted ongoing challenges in China’s industrial sector, raising concerns about regional demand for New Zealand’s exports, particularly in commodities and dairy products. The disappointing figures have sparked a mild wave of risk aversion across Asia-Pacific markets, limiting appetite for the NZD. On the domestic front, comments from Reserve Bank of New Zealand (RBNZ) Monetary Policy Committee member Prasanna Gai contributed to the bearish tone. Gai noted that US tariffs represent a “negative demand shock” for New Zealand, acting as an additional headwind to an already restrained economic recovery. His remarks underscored the growing challenges facing the RBNZ as it seeks to balance persistent inflation pressures with slowing growth momentum. Looking ahead, market participants will be closely watching upcoming US employment data and Chinese trade figures for fresh direction. A continuation of strong US data could reinforce the Fed’s higher-for-longer policy outlook, potentially keeping the NZD under pressure. Conversely, any signs of stabilisation in China’s manufacturing activity or a softer US dollar could offer the Kiwi some relief. For now, the NZD/USD pair remains vulnerable below the 0.5800 resistance area, with near-term support seen around the 0.5700 mark. Broader risk sentiment and global data trends are likely to dictate the next move for the Kiwi in the days ahead.Key Movers
The US Federal Reserve delivered its second consecutive 25-basis-point “risk-management” rate cut on Wednesday, a move that came as no surprise to markets. The decision, aimed at supporting economic stability amid mixed global conditions, was largely priced in. Instead, investors focused on Chair Jerome Powell’s post-meeting remarks for clues about the Fed’s next steps. Powell adopted a cautious tone, making it clear that another rate cut in December was “not a foregone conclusion.” His comments suggested the central bank may now shift toward a more data-dependent approach, assessing incoming economic indicators before making further policy adjustments. This marked a subtle but important change in tone, hinting that the Fed may be nearing the end of its current easing cycle. The immediate market reaction reflected this sentiment. The US dollar extended its advance, buoyed by reduced expectations for additional near-term rate cuts. The US Dollar Index (DXY), which measures the Greenback’s value against a basket of six major currencies, climbed for the third consecutive session, hovering near a three-month high around 99.74. Treasury yields also edged higher, as investors recalibrated their forecasts for US monetary policy heading into year-end. Powell’s remarks reinforced growing confidence in the underlying strength of the US economy. Recent data has shown resilience in consumer spending and the labor market, even as inflation remains above the Fed’s 2% target. This combination of steady growth and sticky inflation supports the Fed’s more cautious stance, reducing pressure for aggressive rate cuts. Meanwhile, global investors are watching how diverging central bank policies could shape currency markets. With the Fed signaling a pause while other major central banks, such as the European Central Bank (ECB) and the Bank of Japan (BoJ), remain accommodative, the dollar is likely to retain its appeal as a relative safe haven. Looking ahead, traders will closely monitor upcoming US employment and inflation reports for further direction. Stronger-than-expected data could reinforce the view that the Fed will hold rates steady in December, potentially extending the dollar’s rally. Conversely, signs of economic softening might reopen the door for another cut—but for now, the Fed’s message is one of patience and prudence.Expected Ranges
- NZD/USD: 0.5600 - 0.5800 ▼
- NZD/EUR: 0.4850 - 0.5050 ▼
- GBP/NZD: 2.2950 - 2.3150 ▲
- NZD/AUD: 1.1300 - 1.1500 ▼
- NZD/CAD: 0.7900 - 0.8100 ▲