NZD/USD advances to near 0.5850 following stronger-than-expected Chinese trade data
- NZD/USD appreciates as the US Dollar struggles amid increasing investor concerns, leading to a shift away from US assets.
- The NZD also benefits as China’s trade surplus surged to $102.6 billion in March, beating the $77 billion forecast.
- Fed’s Kashkari noted that the economic impact of Trump’s trade war would hinge on how trade uncertainties are resolved.
The NZD/USD pair continues its upward momentum for the fourth consecutive session, trading around 0.5840 during the Asian session on Monday. The New Zealand Dollar (NZD) gains traction as the US Dollar (USD) weakens following US President Donald Trump’s announcement late Sunday of less aggressive tariffs on Chinese imports, including semiconductors and electronics. Trump clarified that these items will remain subject to the existing 20% fentanyl-related tariffs rather than the initially rumored 145%.
NZD also benefits from stronger-than-expected Chinese trade figures for March—critical for New Zealand given its economic ties to China. China's trade surplus, measured in Yuan, surged to CNY 736.72 billion from CNY 122 billion in February. In USD terms, the surplus hit $102.6 billion, beating the $77 billion forecast, though down from the previous $170.51 billion. Exports rose 13.5% year-over-year, accelerating from February's 3.4%, while imports fell 3.5%, a smaller drop compared to the prior 7.3% decline.
China’s General Administration of Customs acknowledged the challenging global environment but remained optimistic, stating that foreign trade has shown both quantitative and qualitative growth. Officials reaffirmed China's resolve to implement necessary measures to counter US actions and protect national sovereignty.
Meanwhile, the US Dollar Index (DXY) declined for a third straight session, falling toward the 99.50 mark and approaching Friday’s three-year low of 99.01. The Greenback’s weakness reflects declining investor confidence amid softer economic data and dovish signals from the Federal Reserve.
The US Producer Price Index (PPI) rose 2.7% YoY in March, down from 3.2% in February, with the core rate easing to 3.3%. Commenting on the economic impact of the trade war, Minneapolis Fed President Neel Kashkari said on Face the Nation that the uncertainty poses the most significant blow to confidence since the onset of COVID-19 in March 2020.
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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