The NZD/USD pair rebounded from a two-year low, rising to around 0.5600 during the early Asian session on Tuesday. A modest decline in the US Dollar, coupled with positive economic data from China, helped buoy the New Zealand Dollar. Traders are now awaiting the release of the US Producer Price Index (PPI) for December, which is scheduled for later in the day.
The US Dollar Index (DXY), which measures the greenback against a basket of other currencies, is currently trading near 109.60, after retreating from a recent high of 110.17, the highest level since November 2022. Meanwhile, the 10-year US Treasury bond yield has climbed to 4.8%, its highest level since late 2023.
The strong US December Nonfarm Payrolls (NFP) report released on Friday led traders to scale back their expectations for interest rate cuts by the US Federal Reserve (Fed) in 2025, which could bolster the USD. Swaps markets now predict just one quarter-point rate cut in 2025, with some analysts suggesting the easing cycle has come to an end.
Chinese Economic Recovery Provides Support for NZD
On the Kiwi front, data from China provided additional support. China’s exports grew by 10.7% in December compared to a year earlier, surpassing expectations, according to official customs data. Additionally, China’s trade surplus widened to $104.84 billion in December, up from $97.44 billion in November. As China is a major trading partner for New Zealand, the strong economic data is seen as a positive for the New Zealand Dollar.
However, market sentiment remains cautious, as U.S. President-elect Donald Trump is set to return to the White House on January 20. This could reignite fears of a renewed trade war between the US and China, potentially weighing on the China-sensitive Kiwi.
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