Insights 
VT 
NZD/USD is trading positively above 0.5700, reaching about 0.5720 during Wednesday’s Asian trading hours. China’s Consumer Price Index (CPI) dropped 0.3% year on year in September, exceeding expectations, while the Producer Price Index (PPI) declined 2.3%.
The easing of China’s deflation benefits the NZD due to China being New Zealand’s largest trading partner. However, ongoing US-China trade tensions may limit NZD’s upward movement.
US Federal Shutdown Impact
The US federal shutdown could adversely affect the US Dollar, creating potential advantages for NZD/USD. The Senate’s failure to advance a bill to end the shutdown further influences the currency’s dynamics.
The New Zealand Dollar is driven by New Zealand’s economic health and central bank policy. High dairy prices and a strong Chinese economy positively impact NZD due to export connections.
The Reserve Bank of New Zealand (RBNZ) regulates interest rates to maintain inflation, affecting NZD through investor interest. High-interest rates enhance the appeal of NZD, while lower rates may weaken it.
Economic data significantly influences NZD as strong growth and low unemployment can lead to higher interest rates. Risk sentiment also plays a role, with NZD appreciating in low-risk environments and depreciating during economic uncertainty.
Support For NZD/USD Pair
We see the NZD/USD pair finding some support above 0.5700, which reminds us of a similar situation back in late 2023. At that time, deflationary pressures from China were a major concern, weighing heavily on the Kiwi. However, recent data for September 2025 shows China’s CPI has stabilized at a more encouraging +0.6% year-over-year, suggesting their economic footing is now firmer.
On the US side, the dynamic is quite different from the government shutdown fears we saw in 2023. The US Dollar is currently supported by a hawkish Federal Reserve, as the latest US inflation figures for September 2025 came in at a stubborn 3.9%. This has pushed market expectations for a Fed rate cut well into mid-2026, keeping the Greenback attractive.
Meanwhile, the Reserve Bank of New Zealand is signaling a more dovish stance as New Zealand’s Q3 2025 inflation cooled to 3.5%, moving closer to its target range. This contrasts with the Fed’s position and puts a natural cap on the NZD/USD exchange rate. The interest rate differential, which now favors the US by over 200 basis points, is a significant factor we are watching.
Given these conflicting signals—a recovering China versus a strong US Dollar—we expect the pair to trade within a relatively tight range in the coming weeks. For derivative traders, this suggests that strategies like selling strangles or condors, which profit from low volatility, could be advantageous. We are looking at a likely range between 0.5650 and 0.5850.
We must also be mindful of broader market sentiment, as the Kiwi is considered a risk-sensitive currency. Any escalation in global geopolitical tensions could trigger a flight to the safety of the US Dollar, a pattern we have seen repeatedly over the past two years. Therefore, holding long positions on the NZD carries extra risk in the current environment.
