The NZD/USD pair posts modest gains near 0.5935 during the Asian trading hours on Thursday. The New Zealand Dollar (NZD) strengthens against the Greenback amid hope for a US-China trade deal. Traders await the release of US ISM Manufacturing Purchasing Managers Index (PMI) data, which is due later on Thursday.
US President Donald Trump said early Thursday that there is a “very good probability that the United States will reach a deal with China, but the agreement must align with its conditions. Risk sentiment improves following Trump’s comments, which provides some support to the Kiwi.
However, the implementation of US tariff policy has been erratic, and trade uncertainty is very high. Any signs of renewed escalation between the world’s two largest economies could weigh on the China-proxy NZD, as China is a major trading partner to New Zealand.
China’s official Purchasing Managers’ Index (PMI) data on Wednesday failed to boost the NZD. The National Bureau of Statistics revealed that the country’s Manufacturing PMI contracted to 49 in April versus 50.5 prior and 49.9 expected. The Non-Manufacturing PMI declined to 50.4 in April from 50.8 in March, weaker than the 50.7 expected.
Meanwhile, the rising bets of further rate cuts from the Reserve Bank of New Zealand (RBNZ) might contribute to the Kiwi’s downside. The markets fully expect the RBNZ to cut its 3.5% OCR by 25 basis points (bps) in May, with a further reduction to 2.75% by year-end.
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.