New Zealand Dollar gains as US Dollar weakens on falling yields
- NZD/USD rises amid easing Treasury yields and lower crude oil prices weighing on the US Dollar.
- Markets price in a Fed pause this month following dovish remarks from New York Fed President John Williams.
- The New Zealand Dollar stays strong after China's annual CPI rose 0.9% in September, missing forecasts.
NZD/USD gains ground for the second successive day, trading around 0.5620 during European hours on Wednesday. The pair remains stronger as the US Dollar (USD) holds losses, weighed down by easing US Treasury yields and lower oil prices. The yield on the 10-year Treasury note fell for the second consecutive day to 5.194%, while the 30-year yield dropped for a fourth straight session to 5.548%, following both yields hitting multi-decade highs over the past two weeks.
Meanwhile, crude oil prices eased after US President Donald Trump announced that Taiwan will purchase 30% of gas from the Alaska LNG pipeline and invest roughly $4.4 billion, building on South Korea’s $50 billion pledge. Trump reiterated that oil prices will fall soon and predicted the Iran war will end quickly. However, traders remain cautious as escalating hostilities between Saudi Arabia and Iran-backed Houthi rebels continue to fuel fears of Middle East supply disruptions.
The Greenback faced additional pressure following dovish remarks from New York Federal Reserve President John Williams. Speaking on Tuesday, Williams noted that while one more rate hike may be appropriate this year, he foresees no further rate increases in 2027. Consequently, the CME FedWatch Tool shows markets pricing in over a 78% probability that the Fed will hold interest rates steady this month, alongside a 90% chance of a rate hike in December.
Market focus now shifts to the US September CPI inflation report scheduled for release later in the North American session, which could provide clearer guidance on the Fed's policy trajectory. Headline U.S. CPI is expected to rise 3.6% year-over-year in September, up from 3.4% in August, while Core CPI—which excludes volatile food and energy costs—is projected to edge up to 2.5% from 2.4% in the previous month.
The New Zealand Dollar (NZD) remains stronger following the release of Consumer Price Index (CPI) inflation data from China, New Zealand’s major trading partner. China's annual CPI climbed 0.9% in September, up slightly from 0.8% in August, though coming in just below the market consensus of 1.0%. On a month-over-month basis, Chinese CPI rose 0.2% in September compared to a 0.4% increase previously, trailing the expected 0.3% growth. Meanwhile, China’s Producer Price Index (PPI) surged 5.0% year-over-year in September, accelerating from August's 3.8% increase and beating market expectations of 4.5%.
Technical Analysis: NZD/USD rises above nine-day EMA
In the daily chart, NZD/USD trades at 0.5620, maintaining a bearish near-term tone as spot holds under the 50-day Exponential Moving Average (EMA). Price trades just above the nine-day EMA, hinting at minor short-term stabilization, while the 14-day Relative Strength Index (RSI) at 37.9 remains below the midline and suggests that downside momentum is softening rather than reversing.
On the topside, initial resistance appears at the 50-day EMA near 0.5731, with a more significant barrier at the horizontal level around 0.6100. On the downside, immediate support is provided by the nine-day EMA at 0.5617; a daily close below this short-term average would reopen the path for further losses, keeping the pair entrenched in its broader bearish structure.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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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