The New Zealand dollar (NZD) has been experiencing downward pressure in the face of a risk-off market sentiment. Analysts note a reluctance among NZD investors to shift their positions ahead of the Reserve Bank of New Zealand’s (RBNZ) interest rate decision, leading to limited short-term movement in the currency. Recent reports highlight that the NZD has dropped to near 90-day lows, trading around 10.56 against the South African rand (ZAR), which is 2.1% below its three-month average of 10.79.
With the upcoming potential for stricter tariffs under a Trump presidency affecting key commodities, experts suggest that demand for these commodities—and consequently the NZD—may weaken. Additionally, the correlation between NZD and Australian dollar (AUD) movements plays a role, as both currencies are influenced by the same commodity markets.
The ZAR has also faced challenges, particularly due to the recent US-imposed 30% tariff on South African goods. This punitive measure could further dampen the ZAR, as South Africa is heavily reliant on foreign investment to stabilize its budget and current account deficits. Market analysts emphasize that fluctuations in sentiment towards emerging markets heavily impact the ZAR.
Furthermore, movements in the oil market have implications for both currencies. As of now, oil prices (Brent Crude OIL/USD) are trading at $69.28, which is significantly above the three-month average of $67.33. This volatility, with oil prices fluctuating as much as 31.1% from a low of $60.14 to a high of $78.85, could influence the ZAR given the South African economy's ties to commodity exports.
Overall, currency forecasters suggest that without a significant change in the interest rate outlook from the RBNZ or a shift in global trade policies, the NZD is likely to remain under pressure against the ZAR in the near term, trading within its established range.