The New Zealand Dollar (NZD) edged higher against the US Dollar (USD) during early European trading hours on Thursday, recovering from initial losses to trade near 0.6040. The recovery in NZD/USD comes amid renewed pressure on the US Dollar, which continues to weaken due to mounting uncertainty over Washington’s shifting tariff policies.
The US Dollar Index (DXY), a measure of the Greenback’s strength against a basket of six major currencies, touched a fresh seven-week low around 98.30 as investor confidence was rattled by ambiguous signals from the White House on trade.
Trump Signals Unilateral Tariff Action, Market Watches for Fallout
On Wednesday, US President Donald Trump intensified trade rhetoric, stating that the administration is prepared to finalize trade deals with non-cooperative partners unilaterally. Speaking at the Kennedy Center, Trump declared, “At a certain point we’re just going to send letters out saying, ‘this is the deal,’ you can take it or leave it.”
He added that these letters would be issued within “a week and a half to two weeks,” targeting trading partners that have failed to present counterproposals or are seen as negotiating in bad faith.
The escalation in tariff talk has weakened the US Dollar, bolstering demand for high-beta currencies like the NZD. However, concerns linger around the substance and sustainability of the latest trade arrangements, particularly with China.
NZD Support Capped by China Uncertainty
While the US Dollar’s decline has lent short-term support to the Kiwi, the New Zealand Dollar remains under pressure relative to other major currencies due to doubts surrounding the trade agreement’s balance and China’s economic outlook.
In a Truth Social post, President Trump claimed that the United States will receive 55% in tariffs compared to China’s 10%, and that the relationship with China remains “excellent.” He also highlighted provisions for upfront Chinese rare-earth supplies and the continuation of educational exchanges, stating, “Chinese students using our colleges and universities… has always been good with me!”
Despite these remarks, the lack of visible reciprocal benefits for China in the deal raises questions about the longevity of the trade truce. This skepticism weighs heavily on the New Zealand Dollar, given New Zealand’s deep trade ties with China.
The Kiwi remains vulnerable to shifts in sentiment tied to China’s economic health, and any downturn or policy friction with Beijing tends to directly impact New Zealand’s export-driven economy.
Outlook
The NZD/USD pair may continue to find near-term support from broad USD weakness, but further gains could be capped unless greater clarity emerges on US-China trade relations. Market participants will be closely watching for updates on official Chinese responses to the deal, as well as key economic indicators out of China and New Zealand in the days ahead.
