Insights 
VT 
NZD/USD remains stable near 0.5735 as traders await US inflation data and US-China trade talks. The White House considers limiting software exports to China following Beijing’s rare earth restrictions.
US-China trade discussions involve various topics, including agricultural purchases and nuclear limits. Tensions between these economic powers could affect the Kiwi due to New Zealand’s trade ties with China.
US Government Shutdown Update
The US government shutdown has reached 23 days, becoming the second longest in history. The Senate’s expected funding bill vote is unlikely to end the impasse.
The delay in releasing US economic data complicates the Federal Reserve’s decisions. Despite this, a 25 basis point interest rate cut is expected in October and December, which weakens the USD.
The New Zealand Dollar, influenced by the country’s economic health and central bank policy, is affected by China’s economy. Dairy prices also impact it since dairy is New Zealand’s chief export.
The Reserve Bank of New Zealand alters interest rates based on inflation, impacting NZD’s value. Economic data shapes NZD’s valuation, with strong data leading to rate hikes, while poor data causes depreciation.
Impact of Broader Risk Sentiment on NZD
The broader risk sentiment impacts NZD, strengthening in low-risk periods and weakening during crises. Commodity outlooks influence NZD, as it’s regarded as a commodity currency.
As of today, October 23, 2025, we see the NZD/USD pair facing similar pressures to those seen in the past, particularly regarding US-China relations. The Kiwi acts as a proxy for market sentiment toward China, which remains New Zealand’s largest trading partner. Any negative news from ongoing trade discussions could therefore create headwinds for the currency.
Looking back at the data from late 2023, the US trade deficit in goods with China was running at over $20 billion per month, a figure that shows the deep economic links that cause friction. We should expect any new US plans to curb technology or software exports to trigger a risk-off response, weighing on the NZD. This pattern of trade disputes leading to Kiwi weakness is well-established.
The Federal Reserve’s stance is a critical, yet changed, factor compared to previous years when rate cuts were anticipated. After the aggressive hiking cycle of 2023 that took the Fed Funds Rate to over 5.25%, the market is now pricing in policy divergence between the Fed and other central banks. Any hints that the Fed will hold rates higher for longer will likely strengthen the USD and pressure the NZD/USD pair downwards.
On the other side of the pair, we have to consider the Reserve Bank of New Zealand’s position. The RBNZ also hiked its Official Cash Rate to 5.50% through 2023 to fight inflation, and its future moves will be a key driver. We also saw how volatile dairy prices were during that time, with the Global Dairy Trade index showing sharp falls before a modest recovery, reminding us that NZD is sensitive to its core commodity exports.
Given these crosscurrents, derivative traders should consider strategies that profit from volatility. With major trade talks and central bank decisions creating uncertainty, buying NZD/USD put options could be a prudent way to hedge against a sudden drop caused by escalating US-China tensions. This allows traders to protect downside risk while maintaining exposure to potential gains.
Alternatively, for those uncertain of the direction but expecting a significant move, a long strangle or straddle could be effective. This involves buying both a call and a put option, positioning to profit whether the pair breaks sharply upwards or downwards in the coming weeks. Such a strategy is well-suited for a market awaiting key data points or political outcomes that could swing sentiment dramatically.
