The NZD/USD pair continues its gains for the third straight session, trading around 0.5810 during the early European hours on Tuesday. The risk-sensitive pair is gaining ground amid easing concerns about a broader geopolitical escalation.
The United States launched a large-scale military strike against Venezuela on Saturday and arrested Venezuelan President Nicolas Maduro and his wife. Bloomberg reported on Monday that Maduro has pleaded not guilty to charges brought against him in the United States in a drug and terrorism case, setting the stage for an unprecedented legal battle with major geopolitical implications.
NZD/USD rose as the US dollar faced challenges after a disappointing manufacturing survey. The US ISM Manufacturing PMI fell for the third straight month, falling to 47.9 in December 2025, the lowest level since October 2024, from 48.2 in November and a lower than expected 48.3. The data indicates a faster contraction in manufacturing activity in the United States, driven by lower production and inventories.
Traders are awaiting a series of key US economic releases this week, including the Non-Farm Payrolls (NFP) report, for signals on the outlook for monetary policy. The consensus forecast is for nonfarm payrolls to rise by 55,000.
The New Zealand Dollar (NZD) is being supported by the dovish tone surrounding the Reserve Bank of New Zealand’s (RBNZ) policy outlook. Policymakers indicated that the monetary easing cycle was likely to end last year after a 225 basis point rate cut, while backing off expectations of near-term rate hikes. Governor Anne Breman said interest rates are likely to remain steady for an extended period unless there are surprises.
Frequently asked questions about the New Zealand dollar
The New Zealand Dollar (NZD), also known as the Kiwi, is a popular currency among investors. Its value is widely determined by the health of the New Zealand economy and the policy of the country’s central bank. However, there are some unique characteristics that could make the New Zealand dollar move as well. The performance of the Chinese economy tends to move the New Zealand dollar because China is New Zealand’s largest trading partner. Bad news for the Chinese economy will likely mean New Zealand’s exports to the country will decline, affecting the economy and therefore its currency. Another factor that affects the New Zealand dollar is dairy prices as the dairy industry is New Zealand’s main export. Higher dairy prices boost export income, which contributes positively to the economy and therefore the New Zealand dollar.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain inflation between 1% and 3% over the medium term, with a focus on keeping it near the 2% midpoint. To this end, the Bank sets an appropriate level of interest rates. When inflation is very high, the Reserve Bank of New Zealand will increase interest rates to cool the economy, but this move will also cause bond yields to rise, making it more attractive for investors to invest in the country and thus strengthening the New Zealand dollar. Conversely, low interest rates tend to weaken the New Zealand dollar. The so-called spread, or how New Zealand’s interest rates compare or are expected to compare to those set by the US Federal Reserve, can also play a major role in moving the NZD/USD pair.
New Zealand’s macroeconomic data releases are key to assessing the state of the economy and can influence the valuation of the New Zealand Dollar (NZD). A strong economy, based on high economic growth, low unemployment, and high confidence, is good for the New Zealand dollar. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength is accompanied by higher inflation. Conversely, if economic data is weak, the value of the New Zealand dollar is likely to decline.
The New Zealand Dollar (NZD) tends to strengthen during periods of risk, or when investors view broader market risks as low and are optimistic about growth. This tends to lead to a more positive outlook for commodities and so-called “commodity currencies” such as the New Zealand. Conversely, the New Zealand dollar tends to weaken in times of market turmoil or economic uncertainty as investors tend to sell riskier assets and flee to more stable safe havens.
