The New Zealand dollar (NZD) has recently faced downward pressure largely due to a prevailing risk-off sentiment in global markets. Analysts note that without significant data releases from New Zealand, market sentiment will likely remain a driving factor for the NZD, leading to potential declines. The NZD, which is sensitive to risk appetite, has weakened against the South African rand (ZAR), with its current exchange rate at 10.65, reflecting a 1.8% dip from its three-month average of 10.84.
There are several geopolitical factors that could further influence the NZD. A potential return of Donald Trump to the presidency might entail stricter tariffs on key trading partners like Europe and China, which could dampen demand for commodities that underpin the NZD’s strength. Additionally, there is a noted correlation between the NZD and the Australian dollar (AUD), where both currencies respond similarly to commodity market trends. This correlation could play a role in shaping future movements in the NZD/ZAR exchange rate.
On the other side, the ZAR faces its own challenges, notably the recently imposed 30% tariff on South African goods by the US, which is part of a wider trade conflict. South Africa's economy, heavily reliant on foreign investment to address significant budget and current account deficits, remains vulnerable to shifts in global investor sentiment.
The ZAR has also been influenced by fluctuations in oil prices, with recent data showing oil trading at $68.80, which is 3.2% above its three-month average of $66.66. The volatile range of oil prices, fluctuating between $60.14 and $78.85, suggests that changes in oil demand or supply could have downstream effects on the ZAR, particularly as South Africa is a key exporter of coal.
Overall, as the NZD remains under pressure due to external trade dynamics and risk aversion, the ZAR’s vulnerability to geopolitical developments and commodity prices indicates that both currencies will likely experience turbulent movements ahead. Market watchers will need to pay close attention to these factors to navigate currency transactions effectively.