NZD/USD holds gains above 0.6050 due to RBNZ cautious tone

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NZD/USD extends its gains for the second successive session, trading around 0.6060 during the European hours on Thursday.

NZD/USD holds gains as the New Zealand Dollar is supported ahead of the RBNZ rate decision.
The US Dollar stays subdued despite expectations that the Fed will hold rates after strong jobs data.
The CME FedWatch tool suggests markets price a 92% chance the Fed holds rates, up from 80% a day earlier.

NZD/USD extends its gains for the second successive session, trading around 0.6060 during the European hours on Thursday. The pair maintains its gains as the New Zealand Dollar (NZD) draws support from cautious sentiment ahead of next week’s Reserve Bank of New Zealand (RBNZ) policy decision, with the central bank widely expected to leave interest rates unchanged.

Traders will likely observe RBNZ Inflation Expectations for the first quarter of 2026 due on Friday. Focus will shift toward the United States (US) Consumer Price Index (CPI) inflation report will be the highlight later in the North American session.

The NZD/USD pair maintains its position as the US Dollar (USD) remains subdued despite growing expectations that the Fed will keep rates unchanged after stronger-than-expected US jobs data.

The CME FedWatch tool suggests that financial markets are now pricing in nearly a 92% probability that the Fed will leave rates unchanged at its next meeting, up from 80% the previous day. Markets anticipate the first cut likely in June and a possible follow-up in September.

January’s Nonfarm Payrolls (NFP) increased by 130,000 in January, following a revised 48,000 gain in December (previously 50,000), and surpassed market expectations of 70,000. Meanwhile, the Unemployment Rate edged down to 4.3% from 4.4%.

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.