The NZD/USD exchange rate rose to approximately 0.6075 during Monday’s Asian trading session, buoyed largely by developments in China. The People’s Bank of China announced a significant reduction in the one-year Loan Prime Rate, lowering it from 3.35% to 3.10%, which was larger than analysts had anticipated. This decision reflects China’s ongoing efforts to stimulate its economy and combat deflation, a move that is expected to positively impact demand for the New Zealand dollar, given China’s status as its largest trading partner.
Closer to home, the New Zealand dollar’s gains come despite mounting speculation regarding further easing measures from the Reserve Bank of New Zealand (RBNZ). The latest inflation figures show a decline that has brought the rate closer to the central bank’s target range of 1% to 3%. Such economic conditions could potentially limit any further climbs in the NZD.
In the US, expectations surrounding the Federal Reserve’s monetary policy are also influencing currency dynamics. Specifically, market analysts are forecasting a shift towards less aggressive monetary easing from the Fed, which may bolster the US dollar against the Kiwi. Current assessments suggest a greater than 90% likelihood of a quarter-point rate cut in November, with two additional cuts projected before the end of 2024. By September 2025, the policy rate may settle within the 3.25% – 3.5% range.
As Federal Reserve officials prepare for speeches later in the day, traders will be closely watching for indications of future monetary policy direction, which could have significant implications for the NZD/USD pair in the coming sessions.
