NZD/USD holds losses below 0.5800 despite upbeat Chinese PMI data

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The NZD/USD pair holds losses near 0.5785 during the Asian trading hours on Wednesday. The New Zealand Dollar (NZD) remains weak against the US Dollar (USD) despite the upbeat Chinese economic data. Traders brace for the release of the US Initial Jobless Claims report later on Wednesday.

NZD/USD holds negative ground around 0.5785 in Wednesday’s Asian session.
The Chinese NBS Manufacturing PMI rose to 50.1 in December, stronger than expected.
Fed minutes showed officials were in a tight split over the December rate cut.

Data released by China’s National Bureau of Statistics (NBS) on Wednesday showed that the country’s Manufacturing Purchasing Managers' Index (PMI) rose to 50.1 in December, versus 49.2 prior. The reading came in stronger than the expectations of 49.2 in the reported month. The NBS Non-Manufacturing PMI climbed to 50.2 in December, compared to 49.5 in November. The market forecast was for a 49.8 print.

Meanwhile, China's RatingDog Manufacturing PMI rose to 50.1 in December from 49.9 in November. The stronger-than-expected Chinese PMI reports fail to boost the China-proxy Kiwi amid a cautious mood as traders prepare for the New Year holidays. Trading volumes are expected to remain thin later in the day.

The US Federal Reserve (Fed) cut the federal funds rate by 25 basis points (bps) at its December policy meeting, bringing the target range to 3.50%-3.75%. The US central bank delivered a cumulative 75 basis points of rate cuts in 2025, amidst a cooling labor market and slightly elevated inflation.

According to minutes from the Fed's December 9-10 meeting, most Fed officials viewed further interest-rate reductions as appropriate, provided inflation declines over time, although they remained divided over when and by how much to cut. Following the FOMC minutes’ release, the odds of a January cut based on federal funds futures contracts declined slightly to about 15%, according to the CME FedWatch tool.

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.