The NZD/USD pair loses ground to near 0.5605 during the early Asia session on Monday. The New Zealand Dollar (NZD) weakens against the US Dollar (USD) amid expectations that the Reserve Bank of New Zealand (RBNZ) will deliver a rate cut at the November meeting on Wednesday.
The RBNZ surprised markets with a larger-than-expected reduction, cutting its Official Cash Rate (OCR) by 50 basis points (bps) to 2.50% at its October meeting. The market consensus points to a 25 bps rate cut at the November meeting, bringing the OCR to 2.25%. The RBNZ released its November 2025 Financial Stability Report earlier this month, noting that risks to financial stability remain heightened due to global uncertainty and underperformance in parts of the economy.
Traders will closely monitor the message of the RBNZ’s stance after the rate decision. However, less dovish remarks or signs of an end to the RBNZ’s easing cycle could help limit the NZD’s losses in the near term.
On the USD’s front, the dovish comments from the Federal Reserve (Fed) policymakers could undermine the Greenback and act as a tailwind for the pair. New York Fed President John Williams said on Friday that the Fed could still trim interest rates in the near term, without jeopardizing its inflation goal. According to the CME FedWatch tool, Fed funds futures are now pricing in nearly a 74% probability of a 25 basis points (bps) rate cut at the Fed December meeting, up from 40% odds that markets priced a week ago.
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.
