The New Zealand dollar (NZD) has recently faced downward pressure as investors appear to be discounting improvements in domestic business sentiment. Despite a notable recovery in business morale, the NZD slid further on Thursday, influenced primarily by waning risk appetite in the broader market. Analysts suggest that unless risk dynamics shift positively, the kiwi may continue to experience declines.
Recent economic data highlights significant developments impacting the NZD. Inflation in New Zealand reached 3.0% for the third quarter of 2025, aligning with forecasts and hitting the upper end of the Reserve Bank of New Zealand's target range. This rise in inflation is largely attributed to soaring electricity prices and rent. In reaction to economic cooling and escalating costs, the Reserve Bank of New Zealand (RBNZ) cut the official cash rate by 50 basis points to 2.5%. The central bank anticipates that inflation will trend down to around 2% by mid-2026, reflecting expected spare capacity in the economy.
On the domestic front, the RBNZ is set to relax mortgage lending rules effective December 1, 2025, in a bid to enhance market access for homebuyers. This decision comes in response to declining house prices, which are now viewed as more sustainable. Additionally, New Zealand is focusing on reinforcing regional trade relationships amidst ongoing US-China tensions, as emphasized by Finance Minister Nicola Willis.
In terms of performance against key currencies, the NZD is currently trading at 7-day lows near 0.5742 against the US dollar, which is 1.8% below its three-month average of 0.5848. The NZD to Euro rate sits at 0.4963, marginally below its average, while the NZD to GBP has maintained stability just above its average. Conversely, the NZD to Japanese yen is trading at 88.36, reflecting a stronger position, being 1.4% above its three-month average. Market participants should closely monitor these fluctuations, as ongoing developments could influence the NZD's trajectory in the near term.
