The NZD/USD pair attracts some sellers to around 0.5940 during the early Asian session on Friday, pressured by a stronger US Dollar (USD). The rising Unemployment Rate in New Zealand weighs on the Kiwi, dragging the pair to the lowest level in almost two weeks. Traders will keep an eye on the preliminary reading of the Michigan Consumer Sentiment Index report for February, which will be released later on Friday.
The Greenback receives some support as traders turn more risk-averse and markets assess shifts in Federal Reserve (Fed) leadership expectations. Analysts expect Warsh would pursue a “more gradual path lower” compared to other “dovish” candidates. Financial markets are pricing in nearly a 75.3% chance that the Federal Reserve (Fed) will hold interest rates steady at its March policy meeting, with anticipation of a first rate reduction in June, according to the CME FedWatch tool.
New Zealand’s Unemployment Rate climbed to 5.4% in the fourth quarter (Q4) of 2025, the highest since 2015, Statistics New Zealand reported on Wednesday. This reading came in worse than the estimations of 5.3%.
This report has led markets to push back expectations for further Reserve Bank of New Zealand (RBNZ) rate hikes to later in 2026, which could undermine the Kiwi against the USD. Swaps markets are now pricing in over a 60% probability of a rate reduction by the May policy meeting.
On the other hand, weaker-than-expected US labor market data might weigh on the USD and cap the downside for the pair. US job openings unexpectedly fell in December to the lowest level since 2020 and layoffs rose. Companies revealed the most job cutbacks in January since the Great Recession in 2009, while applications for US unemployment benefits rose more than forecast last week.
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
