Kiwi dollar steadies as easing US–China tensions boost risk sentiment
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Daily Currency Update
The New Zealand dollar began the week on a steady footing, with the NZD/USD pair trading around US$0.5771, up about 0.30% on Monday, as improving global sentiment and easing trade tensions between the United States and China bolstered demand for risk-sensitive currencies. The Kiwi, often regarded as a proxy for Chinese economic growth, tends to strengthen when optimism around China’s economic outlook improves.Recent signs of progress in US–China relations have lifted market confidence, fuelling expectations of more stable trade flows and stronger demand for commodities, both of which are key drivers for the New Zealand economy. New Zealand’s currency is particularly sensitive to developments in China, its largest trading partner, given the country’s heavy reliance on agricultural and dairy exports. Any signs of smoother economic cooperation between Washington and Beijing are typically seen as positive for New Zealand’s trade prospects and, by extension, its currency.
In addition, the improvement in global risk appetite has encouraged investors to rotate back into commodity and Asia-linked currencies, which had come under pressure earlier in the month, amid concerns about slowing global growth and higher US yields. Looking ahead, traders will be watching for further signals from China’s economic data and any new developments in global trade discussions that could influence sentiment.
Domestically, attention will also turn to upcoming New Zealand economic indicators, which will help shape expectations for the Reserve Bank of New Zealand’s (RBNZ) policy outlook. For now, however, the Kiwi appears well-supported by the shift toward optimism in global markets, with improving trade dynamics offering a welcome tailwind for the currency’s short-term outlook.
Key Movers
On the US front, all eyes are now on the Federal Reserve’s monetary policy decision scheduled for Wednesday, a key event that could set the tone for global markets heading into November. Investors widely expect the Fed to deliver a 25-basis-point rate cut, marking its second consecutive reduction and lowering the benchmark federal funds rate to a range of 3.75%–4.00%.The move would signal that the central bank is maintaining a cautious but supportive stance toward the economy as growth shows signs of moderation. This dovish policy outlook has continued to weigh on the US dollar, which has been under pressure in recent sessions amid growing uncertainty about the Fed’s longer-term trajectory.
Within the central bank, policymakers remain split over how aggressively to proceed with easing. Some officials have argued that a faster pace of rate cuts is necessary to offset a cooling labour market and support consumer spending, while others caution that moving too quickly could risk reigniting inflation, which remains stubbornly above the 2% target.
The upcoming policy statement and Fed Chair Jerome Powell’s press conference will be closely scrutinised for clues about the balance of these internal debates. Should Powell strike a more hawkish tone, emphasising inflation risks or signalling a slower pace of cuts, it could offer the Greenback a short-term lift as markets recalibrate expectations. However, if the Fed’s message leans firmly toward continued easing, the US dollar may remain under downward pressure, particularly against higher-yielding and growth-sensitive currencies.
Overall, this week’s decision represents a delicate balancing act for the Fed as it seeks to navigate between sustaining economic momentum and keeping inflation in check. Investors are bracing for potential volatility across currency and bond markets as Powell’s remarks shape the outlook for US monetary policy in the months ahead.
Expected Ranges
- NZD/USD: 0.5650 - 0.5850 ▲
- NZD/EUR: 0.4850 - 0.5050 ▲
- GBP/NZD: 2.3000 - 2.3200 ▼
- NZD/AUD: 1.1250 - 1.1450 ▼
- NZD/CAD: 0.7950 - 0.8150 ▲