New Zealand dollar struggles to find direction despite softer US dollar

Daily Currency Update

The New Zealand Dollar (NZD) is struggling to gain momentum on Thursday, failing to fully benefit from a softer US dollar and a generally improved appetite for risk in global markets. The kiwi continues to trade without a clear directional bias, with recent reversals from the week’s highs near 0.5670 finding support just above the 0.5650 level. After sliding to a seven-month low around 0.5630 earlier in the week, the NZD managed to recover some ground on Wednesday. However, upside moves have remained limited as traders digest a disappointing batch of domestic employment data that has reignited speculation about potential interest rate cuts from the Reserve Bank of New Zealand (RBNZ) in the coming months. New Zealand’s latest labor market report painted a subdued picture of the country’s employment conditions. Job growth was flat in the third quarter, with employment holding steady at 0% compared with market expectations for a modest 0.1% rise. Meanwhile, the unemployment rate ticked up to 5.3%, marking its highest level in nine years and edging higher from 5.2% in the previous quarter. The uptick underscores ongoing challenges in the New Zealand economy, which continues to grapple with weaker consumer spending and sluggish business investment. The soft labor data has prompted investors to reassess the RBNZ’s policy outlook. With inflation pressures gradually easing and the jobs market showing signs of strain, market participants are increasingly betting that policymakers may need to adopt a more accommodative stance to support growth. This sentiment has weighed on the kiwi, even as the broader market mood remains somewhat risk-friendly amid a modest decline in the US dollar. Globally, the greenback has softened as traders position ahead of upcoming US economic data and monitor developments surrounding the ongoing federal government shutdown. Softer Treasury yields and easing rate expectations have limited the dollar’s upside, offering some relief to risk-sensitive currencies like the NZD. Looking ahead, the kiwi is likely to remain range-bound in the near term as traders await fresh catalysts. A sustained break above 0.5670 could open the door for further gains toward 0.5710, while initial support lies near 0.5630. Broader sentiment, along with clues from next week’s US inflation and RBNZ commentary, will likely set the tone for the pair’s next move.