NZD/USD declines to near 0.6000 as New Zealand labor data dampens RBNZ rate hike prospects
- NZD/USD drifts lower to around 0.6015 in Monday’s Asian session.
- Softer New Zealand labor market data has led markets to push back expectations for further RBNZ rate hikes to later in 2026.
- The US UoM Consumer Sentiment Index improves to 57.3 in February, stronger than expected.
The NZD/USD pair trades in negative territory near 0.6015 during the Asian trading hours on Monday. The New Zealand Dollar (NZD) edges lower against the US Dollar (USD) as softer labor data pushes out expectations for the Reserve Bank of New Zealand (RBNZ) tightening.
New Zealand's Unemployment Rate climbed to 5.4% in the fourth quarter (Q4) of 2025, the highest since 2015. This figure came in worse than the estimations of 5.3%. This report dampened expectations for any near-term tightening by the RBNZ, which weighs on the Kiwi against the USD. Swaps markets are now pricing in over a 60% probability of a rate reduction by the May policy meeting.
Consumer confidence in the US improved slightly in February, with the University of Michigan's Consumer Sentiment Index rising to 57.3 from 56.4 in January. This figure came in above the market consensus of 55, supporting the Greenback and acting as a headwind for the pair.
The delayed release of the US employment report for January will be published later on Wednesday. Markets expect to see 70,000 jobs added in the US economy in January, while the Unemployment Rate is forecast to remain unchanged at 4.4% during the same period. However, any signs of weakening in the US labor market could undermine the USD in the near term.
New Zealand Dollar FAQs
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.
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.
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.
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.
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