Below 0.5600: New Zealand Dollar slips as traders prepare for US PPI data

NZD/USD slips towards 0.5545 in early Asian trade on Friday.
The US Dollar draws support as traders increase bets on rate hikes.
Expectations of further RBNZ rate increases ease as New Zealand’s Unemployment Rate rises.

Selling pressure takes NZD/USD towards 0.5545 in Friday’s Asian session, as increased expectations of a larger December rate hike by the Federal Reserve (Fed) lend some support to the US Dollar (USD). Attention now turns to the US Producer Price Index (PPI) for October, scheduled for release later on Friday.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Expectations of successive interest-rate increases have strengthened amid persistent US inflation and hawkish comments from Fed officials. According to Fed Governor Christopher Waller, a 50-basis-point increase should be considered if core inflation stays elevated.

For the Fed’s next meeting on December 8-9, traders assign nearly an 85.5% probability to a rate increase, with the likelihood of a half-point hike at 14.5%, according to the CME FedWatch tool.

Friday’s key release is the US PPI inflation report for October. Forecasts point to a 6.6% YoY rise in headline PPI and a 5.0% YoY increase in core PPI for the same period. Stronger-than-expected readings could provide a lift to the Greenback.

The Kiwi also faces pressure from weaker labour market data in New Zealand, where the Unemployment Rate has reached 5.7%, an 11-year high. The increase has curtailed expectations of aggressive rate hikes by the RBNZ.

Why are the Kiwi and Korean won outperforming as RBNZ mandate risks ease?

Brown Brothers Harriman analysts point to strength in both currencies, noting that "KRW is outperforming across the board on Korean exporters’ dollar selling," and that "NZD tops the G10 FX leaderboard." On New Zealand’s preliminary election outcome, their assessment is that it "reduces the risk the RBNZ returns to a dual inflation-employment mandate which could have tilted policy in a more dovish direction given weak labor market condition."

Brown Brothers Harriman outlines the political backdrop: "New Zealand's ruling center-right coalition holds a one seat majority following Sunday’s election, with final results due November 27." Led by the National Party, the incumbent coalition "wants to stick to the RBNZ’s sole price stability mandate which has been in place since December 2023," while the alternative position is described as follows: "The Labour Party, meanwhile, ran on a proposal to return to a dual inflation-employment mandate." This difference in policy is viewed as an important factor behind the Kiwi’s current outperformance.

What does Williams’ resilient US outlook mean for the unfinished inflation fight?

A somewhat more hawkish message from the Fed’s Williams puts the FXS Speechtracker score at 7/10, against a historical average of 6.1/10. His remarks convey confidence in strong, resilient growth that is “strengthening but not overheating.” At the same time, describing inflation as “stubbornly persistent and elevated” and stating that the central bank “still has work to do” maintains a steady bias towards tightening. Williams stresses that action is needed over time to bring inflation back to 2%, while making clear that policy aims to lower the inflation rate, not reverse the overall price level, which could harm economic conditions.

Despite the more hawkish-than-average tone registered by the FXS Speechtracker, the FXS Fed Sentiment Index fell 0.08 points to 147.47, suggesting a modest easing in perceived hawkishness. The reading remains comfortably above the neutral 100 level, leaving the Fed firmly in hawkish territory. Nevertheless, the slight moderation in sentiment suggests a more measured course for future Dollar policy adjustments.

Technical Analysis: Can NZD/USD Shake Off Its Bearish Outlook Below the 100-Day SMA?

With the 100-day simple moving average (SMA) and the Bollinger Bands’ 20-day middle line now limiting gains, the daily chart shows NZD/USD continuing to fall below both indicators. The near-term outlook therefore remains bearish, as the pair trades under pressure in the lower half of the Bollinger envelope. At 37.5, the Relative Strength Index (RSI) is below the neutral 50 level, suggesting continued downside pressure rather than exhaustion from oversold conditions.

The lower Bollinger band near 0.5525 provides immediate support, where sellers may pause to review their positions. Any recovery would first encounter resistance at the middle band around 0.5630 and then the upper band at 0.5730. Further above, the 100-day SMA at 0.5750 remains a bearish hurdle; the pair would need to regain that level to ease the prevailing negative bias.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

New Zealand Dollar: Frequently Asked Questions

Which factors shape movements in the New Zealand Dollar?

Widely traded by investors, the New Zealand Dollar (NZD) is also called the Kiwi. New Zealand’s economic health and its central bank’s policy broadly determine the currency’s value, but several distinctive influences also matter. As China is New Zealand’s largest trading partner, developments in the Chinese economy tend to affect the Kiwi. Adverse Chinese economic news is likely to imply weaker demand for New Zealand’s exports, hurting its economy and, in turn, its currency. Dairy prices are another important driver, given dairy’s position as New Zealand’s main export. Higher prices lift export earnings, supporting both the economy and the NZD.

Why do RBNZ policy decisions matter for the New Zealand Dollar?

Keeping medium-term inflation within a 1% to 3% range, with an emphasis on the 2% midpoint, is the Reserve Bank of New Zealand’s (RBNZ) objective. It sets interest rates at a level suited to that goal. If inflation becomes too high, the RBNZ raises rates to slow economic activity. Higher rates also lift bond yields, making investment in the country more attractive and supporting the NZD. Rate cuts, by contrast, generally weaken the currency. The gap between New Zealand’s interest rates and those set by the US Federal Reserve, including expectations of how that gap may change, can also be a major influence on NZD/USD. This gap is known as the interest-rate differential.

What can economic releases mean for the New Zealand Dollar’s value?

By helping investors assess New Zealand’s economic condition, macroeconomic releases can influence the valuation of the New Zealand Dollar (NZD). Strong growth, low unemployment and high confidence indicate a healthy economy, which is supportive of the currency. Rapid economic growth draws foreign investment and, when accompanied by elevated inflation, may prompt the Reserve Bank of New Zealand to raise interest rates. Weak economic figures, on the other hand, are likely to lead to NZD depreciation.

Why is the New Zealand Dollar sensitive to wider risk appetite?

During risk-on phases, the New Zealand Dollar (NZD) generally gains as investors judge broader market risks to be low and remain positive about growth. Such conditions usually improve the outlook for commodities and for currencies linked to them, including the Kiwi, often described as ‘commodity currencies’. Market turmoil or economic uncertainty tends to have the opposite effect: investors sell higher-risk assets in favour of more stable safe havens, usually weakening the NZD.