NZD/USD weakens below 0.5900 as Iran–US tensions boost US Dollar safe-haven appeal

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The NZD/USD pair loses traction to around 0.5890 during the early European session on Thursday. The US Dollar (USD) strengthens against the New Zealand Dollar (NZD) as escalating tensions in the Middle East and a continued blockade of the Strait of Hormuz boost a safe-haven asset.

NZD/USD softens to near 0.5890 in Friday’s early European session.
Iranian official said it will retaliate if the US resumes attacks.
US GDP came in weaker than expected, growing at an annualized rate of 2.0% in Q1 2026.

Reuters reported on Wednesday that US President Donald Trump is slated to receive a briefing on Thursday on plans for a series of military strikes on Iran in hopes it will return to negotiations on its nuclear program.

An Iranian official said on Thursday that it would respond with "long and painful strikes" on US positions if Washington renewed attacks. Supreme Leader Mojtaba Khamenei stated that Tehran would eliminate "the enemies' abuses of the waterway" under the new management of the strait. Signs of rising tensions in the Middle East could undermine the riskier assets, such as the Kiwi.

The US Federal Reserve (Fed) on Wednesday held the interest rates in a range of 3.5% to 3.75% at its April meeting. That marked the first time four FOMC members dissented since October 1992. The committee noted that "inflation is elevated, in part reflecting the recent increase in global energy prices.” Hawkish remarks from Fed officials could support the Greenback.

On the other hand, weaker-than-expected US Gross Domestic Product (GDP) data could drag the USD lower and act as a tailwind for the pair. The US economy expanded at an annualized rate of 2.0% in the first quarter of 2026 (Q1), the Bureau of Economic Analysis (BEA) showed on Thursday. This figure followed a 0.5% expansion in the previous reading but came in weaker than the expectation of 2.3% growth.

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.