NZD/USD gathers strength above 0.5850 as US job openings fall more than expected

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NZD/USD strengthens to around in Thursday’s Asian session.
US JOLTS Job Openings declined to 7.18 million in July vs. 7.4 million expected.
The dovish tone of the RBNZ might cap the upside for the pair.

The NZD/USD pair gains traction to near 0.5880 during the Asian trading hours on Thursday. The US Dollar (USD) weakens against the New Zealand Dollar (NZD) after economic data showed weakening labor market conditions. Traders await the US weekly Initial Jobless Claims, the ADP Employment Change and the ISM Services Purchasing Managers Index (PMI), which are due later on Thursday.

Data released by the US Bureau of Labor Statistics (BLS) on Wednesday showed that the number of job openings on the last business day of July stood at 7.181 million. This figure followed the 7.357 million (revised from 7.437 million) openings recorded in June and came in below the market expectation of 7.4 million.

This report has supported investor expectations of US monetary policy easing by the Federal Reserve (Fed), weighing on the Greenback. Markets are currently pricing in nearly a 97.5% chance of a 25 basis points (bps) cut at the Fed's September 17 meeting, up from 91% odds before the US JOLTS Job Openings report, according to the CME FedWatch tool.

The Reserve Bank of New Zealand (RBNZ) has been aggressively cutting rates since August 2024 to counteract a fragile recovery that followed a period of aggressive tightening to combat inflation. The New Zealand central bank signaled that further cuts could be coming.

The RBNZ's updated forecasts suggest the Official Cash Rate (OCR) could fall to around 2.5% by early 2026, indicating at least two additional cuts. This dovish stance is more aggressive than many market analysts had predicted, which might undermine the Kiwi in the near term.

New Zealand Dollar FAQs

What key factors drive the New Zealand Dollar?

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.

How do decisions of the RBNZ impact the New Zealand Dollar?

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.

How does economic data influence the value of the New Zealand Dollar?

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.

How does broader risk sentiment impact the New Zealand Dollar?

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.