- NZD / USD falls while the US dollar is gaining strength, following China's decision to exempt certain American imports from its 125%prices.
- American agriculture secretary Brooke Rollins noted that the Trump administration is organizing daily discussions with China on pricing issues.
- The New Zealand dollar remains under additional pressure in a context of growing signs of weakening China's demand.
The NZD / USD pair continues to weaken for the second consecutive session, negotiating nearly 0.5940 during the European session on Monday. The drop is largely motivated by strengthening the US dollar (USD) in the midst of signs of softening tensions between the United States and China.
China announced the exemption from certain American imports from its high prices of 125% on Friday, according to commercial sources. This development triggered the optimism that the prolonged commercial dispute between the two largest economies in the world could be ended at the end.
In addition, American agricultural secretary Brooke Rollins said on Sunday, as Reuters reported, that the Trump administration is involved in daily discussions with China concerning prices. Rollins also noted that negotiations with other business partners were progressing and that several trade agreements were “very close” to completion.
Despite the positive feeling, the yields of the US Treasury remained silent on Monday, the 2 -year and 10 -year tickets giving respectively 3.75% and 4.24%, because investors expect key economic data expected later this week to assess the initial effects of the US President Donald Trump.
The New Zealand dollar (NZD) also faces additional pressure in the middle of signs of slowing China's demand. The reports indicate that some Chinese manufacturers suspended production and are looking for alternative markets in response to American prices, leading to reduced orders and an impact on employment. Although they are not yet widespread, these disturbances could ultimately harm the New Zealand export sector, given the status of China as a major trading partner.
In addition, the NZD remains under pressure, because the markets expect the New Zealand reserve bank (RBNZ) to bring an additional monetary stimulus. A drop in the rate of 25 bases is largely at a large price for the May of RBNZ meeting, forecasts suggesting that rates could be 2.75% by the end of the year.
New Zealand dollar FAQ
The New Zealand dollar (NZD), also known as Kiwi, is a well-known negotiated currency between investors. Its value is largely determined by the health of the New Zealand economy and the country's central bank policy. However, there are unique particularities that can also move NZD. The performance of the Chinese economy tends to move kiwi because China is the largest trading partner in New Zealand. The bad news for the Chinese economy probably means less exports from New Zealand to the country, hitting the economy and therefore its currency. Another factor moving the NZD is the prices of dairy products, because the dairy industry is the main export of New Zealand. The prices of high dairy products increase export income, contributing positively to the economy and therefore to the NZD.
The New Zealand reserve bank (RBNZ) aims to reach and maintain an inflation rate between 1% and 3% in the medium term, with a focus to maintain it near the median point of 2%. To this end, the bank establishes an appropriate interest rate level. When inflation is too high, RBNZ will increase interest rates to cool the economy, but this decision will also increase bond yields, increasing the attraction of investors to invest in the country and thus stimulate NZD. On the contrary, lower interest rates tend to weaken the NZD. The so-called rate differential, or how rates in New Zealand are or should be compared to those set by the American federal reserve, can also play a key role in moving the NZD / USD pair.
Macroeconomic data versions in New Zealand are essential to assess the state of the economy and can have an impact on the evaluation of New Zealand (NZD). A solid economy, based on high economic growth, low unemployment and great confidence is good for NZD. Strong economic growth attracts foreign investments and can encourage the New Zealand reserve bank to increase interest rates, if this economic force meets with high inflation. Conversely, if the economic data is low, the NZD is likely to depreciate.
The New Zealand dollar (NZD) tends to strengthen during risk periods or when investors perceive that the larger risks of the market are low and optimistic about growth. This tends to lead to a more favorable perspective for raw materials and to what are called “basic currencies” such as kiwi. Conversely, the NZD tends to weaken in times of market turbulence or economic uncertainty because investors tend to sell higher risks and to flee to more stable shelters.
