NZD/USD slumps below 0.5650 as New Zealand Unemployment Rate hits nine-year high

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NZD/USD faces some selling pressure to around 0.5640 in Wednesday’s early Asian session.
New Zealand’s Unemployment Rate climbed to 5.3% in Q3, versus 5.2% prior.
US President Donald formalizes fentanyl and reciprocal tariff cuts in the US-China deal.

The NZD/USD pair tumbles to near 0.5640, the lowest since April 10, during the early Asian session on Wednesday. The New Zealand Dollar (NZD) weakens against the US Dollar (USD) after New Zealand’s jobless rate rose to the highest in nine years in the third quarter (Q3). Traders await the ADP Employment Change and the US ISM Services Purchasing Managers Index (PMI) reports, which will be released on Wednesday.

Data released by Statistics New Zealand on Wednesday showed that the Unemployment Rate rose to 5.3% in Q3 from 5.2% in Q2. The figure aligned with the market consensus of 5.3%. Employment was unchanged from the previous three months, weaker than the estimated 0.1% increase.

The Reserve Bank of New Zealand (RBNZ) has cut the Official Cash Rate (OCR) by 300 basis points (bps) since August last year to 2.5%, and most economists expect another 25 bps move at the final meeting of the year on November 26. The dovish stance of the RBNZ could drag the NZD lower against the USD in the near term.

Nonetheless, the positive developments surrounding the US-China trade talks might cap the downside for the China-proxy Kiwi, as China is a major trading partner for New Zealand. Bloomberg reported late Tuesday that US President Donald Trump announced a cut to fentanyl-related tariffs on imports from China, lowering the rate from 20% to 10%, and the continued freeze of some of his reciprocal levies on Chinese goods. The moves will go into effect on November 10

The US government shutdown has entered its sixth week and is set to become the nation’s longest federal funding lapse ever after a short-term funding bill failed in the Senate once again. The latest effort to break the logjam, by passing Republican-backed temporary legislation through Congress, failed in the Senate for the 14th time on Tuesday. Fears that a prolonged US federal shutdown will impact the US economy could undermine the Greenback against the NZD.

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.