Kiwi dollar extends losing streak to four days, amid China growth concerns and dovish RBNZ outlook
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Daily Currency Update
The NZD/USD pair continues its downward trajectory, marking its fourth consecutive daily loss as it hovers near the US$0.5860 level during the Asian trading session on Monday. The Kiwi remains under pressure amid broader risk aversion and a subdued outlook for New Zealand’s economy, compounded by the People’s Bank of China (PBOC) maintaining its benchmark lending rates unchanged in its latest policy decision.On Monday, the PBOC opted to keep both its one-year and five-year Loan Prime Rates (LPRs) steady at 3.00% and 3.50%, respectively. The decision was widely expected but reinforces growing concerns that Beijing may be running out of room, or willingness, for aggressive monetary easing, despite persistent weakness in China’s property sector and broader economic slowdown. As China is New Zealand’s largest trading partner, any signs of sluggish Chinese demand tend to weigh heavily on the New Zealand dollar (NZD), particularly in the context of softening global commodity prices.
In addition to external pressures, the Kiwi is facing mounting headwinds from domestic developments. The Reserve Bank of New Zealand (RBNZ) is perceived to be shifting toward a more dovish policy stance amid signs of a cooling economy. Last week’s GDP report revealed that New Zealand's economy contracted more than expected in the second quarter, raising fears that the country could be slipping into a technical recession.
Meanwhile, the trade balance also disappointed, with the deficit coming in wider than forecast, highlighting weak export performance and continued external imbalances. In response to these developments, money markets have fully priced in a 25-basis-point rate cut by the RBNZ at its October meeting, while also assigning a roughly 25% probability to a deeper 50-basis-point move. This marks a significant shift in market expectations and has placed considerable downward pressure on the NZD in recent sessions.
Technically, the NZD/USD pair remains vulnerable as long as it holds below the US$0.5900 handle, with immediate support seen near the US$0.5830–US$0.5840 region. A decisive break below this zone could open the door for further losses toward the year-to-date lows. On the upside, any meaningful recovery would likely face resistance around the US$0.5900–US$0.5930 area, which previously acted as a support zone.
Looking ahead, market participants will be closely monitoring global risk sentiment, Chinese macroeconomic developments and any shifts in RBNZ commentary. With the combination of a dovish domestic outlook and a tepid global backdrop, the path of least resistance for the Kiwi may remain to the downside in the near term.
Key Movers
The US Dollar Index (DXY), which measures the Greenback’s performance against a basket of six major currencies, is trading marginally lower near 97.55 in early Tuesday trade. The pullback comes after several sessions of firm gains, as traders lock in profits and adopt a wait-and-see approach ahead of a closely watched speech by Federal Reserve Chair Jerome Powell later in the day.The US dollar’s recent strength was underpinned by last Wednesday’s Federal Open Market Committee (FOMC) decision, in which the Fed lowered its benchmark interest rate by 25 basis points, bringing the federal funds target range to 4.00%–4.25%. The rate cut, while widely expected, was accompanied by a notable shift in forward guidance. Policymakers signalled the possibility of two additional rate cuts before the end of the year, citing softening economic conditions and a need to support growth.
Despite these dovish undertones, the market response has been mixed, as inflation in the United States remains elevated and well above the Fed’s 2% target. Core price pressures, particularly in services, continue to show resilience, raising questions about how far the central bank is willing to loosen monetary conditions without risking a reacceleration in inflation. Against this backdrop, all eyes are on Powell’s upcoming remarks for further clarity.
Investors will be listening closely for any nuanced language regarding the Fed’s assessment of inflation dynamics, the labour market, and whether incoming data might alter the current rate path. A more cautious or data-dependent tone could temper expectations for aggressive rate cuts, potentially offering renewed support to the dollar. Conversely, confirmation of the Fed’s dovish pivot may weigh further on the Greenback and fuel increased volatility across FX markets.
From a technical perspective, the DXY faces near-term resistance around the 97.80–98.00 region, a break above which could open the door toward the psychological 98.50 level. On the downside, initial support lies near 97.30, followed by the more critical 97.00 mark. With monetary policy in flux and inflation still a major concern, Powell’s speech could be pivotal in shaping near-term USD sentiment. Traders are also likely to monitor key U.S. data releases later in the week, including core PCE inflation and personal spending figures, for further confirmation of the Fed’s policy trajectory.
Expected Ranges
- NZD/USD: 0.5750 - 0.5950 ▲
- NZD/EUR: 0.4850 - 0.5050 ▲
- GBP/NZD: 2.3000 - 2.3200 ▼
- NZD/AUD: 1.1100 - 1.1200 ▼
- NZD/CAD: 0.8000 - 0.8200 ▼