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US Labor Market Strengthens
The New Zealand Dollar (NZD), known as the Kiwi, is influenced by the country’s economic health and central bank policy. Factors such as China’s economy and dairy prices also impact NZD. Decisions by the Reserve Bank of New Zealand, such as adjusting interest rates, can either strengthen or weaken NZD. Broader risk sentiment influences NZD’s value, with it strengthening during risk-on periods.
Looking back to this time in 2024, we saw the Kiwi strengthen on the back of surprisingly strong retail sales and high business confidence. The NZD/USD pair was trading around 0.5710, supported by the belief that the US Federal Reserve was heading for a rate cut. That sentiment from a year ago provides a useful baseline for our current market outlook.
Kiwi Weakness Against The US Dollar
Now, as of late November 2025, the picture has shifted considerably after the Reserve Bank of New Zealand (RBNZ) hiked rates twice early in the year to combat inflation. While those hikes provided initial support, inflation has remained stubbornly above target, last recorded at 3.5% for the third quarter. The RBNZ is now on a prolonged hold, and the effects of its tightening are becoming apparent.
Recent economic releases show a clear slowdown, creating headwinds for the Kiwi. Third-quarter retail sales for 2025 posted a 0.2% contraction, a stark reversal from the 1.9% growth we observed in the same period last year. Furthermore, the latest Global Dairy Trade auction showed a 4.5% fall in prices, which weighs heavily on New Zealand’s export income and currency valuation.
In the United States, the dovish pivot we anticipated in late 2024 did not fully materialize through 2025. Persistently strong core services inflation, currently at 3.8% annually, has forced the Federal Reserve to maintain a hawkish stance. The market is no longer pricing in cuts but is instead weighing the small probability of one final rate hike in early 2026.
This fundamental divergence has kept the US Dollar strong and pressured the NZD/USD, which is now trading near 0.5550. While US weekly jobless claims have ticked up modestly to 228,000 from the 216,000 level seen last year, the labor market is not showing enough weakness to change the Fed’s position. This resilience in the US economy continues to attract capital away from currencies like the New Zealand Dollar.
For the coming weeks, we should consider strategies that account for continued Kiwi weakness against the US dollar. The rate differential clearly favors the greenback, and New Zealand’s slowing domestic data provides little reason for a reversal. Selling options on any strength in the NZD/USD pair could offer a way to capitalize on the prevailing trend while managing risk.
