The NZD/USD pair continues its losses for the second day in a row, trading around the 0.5730 level during Asian hours on Wednesday. The pair is depreciating as the New Zealand Dollar (NZD) faces challenges after the release of seasonally adjusted domestic building permits, which rose 2.8% m/m in November 2025, and reversed an upwardly revised decline of 0.7% in October.
Traders will likely watch December trade balance data later in the day from China, New Zealand’s close trading partner. The trade balance is expected to expand to $113.60 billion in December, compared to $111.68 billion in the previous reading. Exports are expected to rise by 3.0% year-on-year in December, while imports are expected to rise by 0.9% year-on-year during the same period.
The NZD/USD pair is also losing ground as the US dollar (USD) strengthens despite recent US inflation being benign, suggesting that the Fed could actually cut interest rates as they are priced in by financial markets.
The US core CPI, excluding food and energy, rose 0.2% in December, below market expectations, while annual core inflation held steady at 2.6%, equivalent to a four-year low. The data provided a clearer signal of a decline in inflation after previous releases were skewed by the effects of the lockdown. However, last Friday’s strong non-farm payrolls report, lower unemployment rate, and strong four-week average ADP employment change point to a resilient labor market.
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 risk 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.
