NZD/USD holds losses near 0.5900 as NZ Consumer Confidence Falls in April

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NZD/USD pulls back after registering over 1.25% gains in the previous day, trading around 0.5900 during the Asian hours on Friday. The pair depreciates as the New Zealand Dollar (NZD) remains subdued following the release of weaker mid-tier economic data from the country.

NZD/USD falls as the New Zealand Dollar stays weak after softer mid-tier economic data.
ANZ-Roy Morgan confidence fell to 80.3 in April from 91.3, the lowest since May 2023.
US Dollar gains as Trump maintains Iran port blockade, raising concerns Strait of Hormuz may stay closed.

The ANZ-Roy Morgan Consumer Confidence Index declined to 80.3 in April from 91.3 in March, marking its lowest reading since May 2023. The index has dropped by 20 points over the past two months following the onset of the Middle East conflict, which pushed energy prices sharply higher.

Additionally, seasonally adjusted Building Permits in New Zealand decreased by 1.3% month-on-month in March, reversing an upwardly revised 2.8% gain in February. This represents the first contraction in building consents since last December.

The NZD/USD pair is also under pressure as the ongoing Middle East conflict supports demand for the safe-haven US Dollar (USD). Bloomberg reported on Thursday that US President Donald Trump said he would maintain the naval blockade of Iranian ports, amid concerns that the crucial Strait of Hormuz may not reopen in the near term. Trump also criticized congressional efforts to limit his war powers, including a recent Senate proposal that was rejected earlier in the day.

Meanwhile, the US Federal Reserve (Fed) kept its benchmark interest rate unchanged on Wednesday, in line with expectations. Fed Chair Jerome Powell noted that the economic outlook remains highly uncertain, adding that the Middle East conflict has been a contributing factor to that uncertainty.

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.