Traders are currently estimating about a 58% likelihood that the Reserve Bank of New Zealand (RBNZ) will increase its Official Cash Rate (OCR) to 3% on October 28. This is a decrease from nearly 80% at the end of September, and as a result, the NZD/USD has depreciated. The trading pair is hovering just above 0.5600, with Tuesday marking the first time it exceeded that line since September 28.
According to the RBNZ’s own forecasts from September, the OCR is expected to average 2.81% in the December quarter. This would only be achievable if no changes are made on October 28 and a hike occurs in December, which seems to be what traders are leaning back towards.
The weaker Kiwi is adding to the inflation the RBNZ wants to stop
BNZ suggests that the decline of the Kiwi contributes approximately 0.3 percentage points to its inflation forecast, along with rising fuel costs. The currency’s trade-weighted index is now at a 15-year low. More expensive imports could be a reason to consider raising rates sooner, leading the bank to expect a potential move in October, with the OCR projected to reach 3.75% eventually. RBNZ Governor Breman mentioned in September that the RBNZ does not have a predetermined path, yet the exchange rate seems to be defining one.
New Zealand’s one event on the calendar has no time attached
Governor Breman is set to speak on Thursday, with no specific time announced for this only scheduled New Zealand event before Friday. Back in May, she cast the crucial deciding vote when the committee was split 3-3, so any indications she gives on October will hold significant importance in a tight situation.
On Wednesday, we can expect the release of Fed minutes at 18:00 GMT, and jobless claims are forecasted for Thursday at 12:30 GMT, likely around 200K, an increase from 197K. Then, on Friday, the University of Michigan sentiment survey is due out at 14:00 GMT. It’s worth noting that a 3K swing in claims might not have as much impact on the Kiwi as a single remark from Governor Breman could.
Kiwi levels near the November 2025 low
Resistance: The bounce from Tuesday fell short of 0.5650, which has not been seen since October 1. The next level to watch will be at 0.5700, the point that capped the upticks in late September.
Support: Monday’s low, just under 0.5600, was in line with the November 2025 low. After that, we look at 0.5550 and then 0.5500.
Bias: The overall setup remains short if it closes under 0.5650, with 0.5550 being the primary target and 0.5500 the secondary. The daily Stochastic Relative Strength Index (Stoch RSI) has been under 20 since mid-September, nearing 10, so a rebound towards 0.5650 feels plausible. However, a daily close above 0.5700 would change that narrative.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), or Kiwi, is widely traded among investors. Its value largely reflects the New Zealand economy’s health and the policies of its central bank, but certain unique factors can also influence the NZD’s movements. For instance, since China is New Zealand’s largest trading partner, the performance of China’s economy heavily impacts the Kiwi; negative news out of China can lead to lower exports from New Zealand, affecting the currency’s value. Additionally, dairy prices play a crucial role, as the dairy sector is a major export for New Zealand. Increased dairy prices positively influence export earnings, bolstering the economy and, in turn, the NZD.
The RBNZ targets an inflation rate between 1% and 3% in the medium term, ideally keeping it around the 2% midpoint. To achieve this aim, the bank adjusts interest rates accordingly. If inflation rises too high, the RBNZ will typically raise rates to mitigate it. However, such increases can also make bonds more attractive to investors, thereby strengthening the NZD. Conversely, lower rates usually weaken the currency. Interest rate differentials, particularly when compared to the US Federal Reserve’s rates, significantly affect the NZD/USD dynamics.
Key macroeconomic indicators in New Zealand are crucial for evaluating the economy’s performance and can sway the valuation of the NZD. Strong economic growth, low unemployment, and high consumer confidence typically support NZD strength. Increased economic growth attracts foreign investment and may incite the RBNZ to raise interest rates, especially if inflation is also high. On the other hand, weak economic indicators could lead to a depreciation of the NZD.
The NZD often appreciates during risk-on periods—when investors feel optimistic about market conditions and perceive lower risks. This usually results in a more favorable outlook for commodities, benefiting currencies like the Kiwi. In contrast, during market volatility or economic uncertainty, the NZD tends to weaken as investors usually move away from riskier assets and gravitate towards more stable options.
