NZD/USD climbed to a near two-week high during Wednesday’s Asian session, trading around 0.6065 after a small dip the day before. The move came as the US Dollar stayed weak ahead of the US Nonfarm Payrolls (NFP) report.
Markets are watching the NFP release for clues on the Federal Reserve’s next steps, with rate-cut expectations stretching into 2026. Worries about the Fed’s independence also kept the Dollar near its lowest level in more than a week.
Risk Appetite Supports The Kiwi
Better risk sentiment lowered demand for the US Dollar and supported the New Zealand Dollar. This helped offset softer inflation data from China, which signaled weak household demand and ongoing deflation risks.
China’s Consumer Price Index rose 0.2% year on year in January, down from 0.8% the month before. Producer prices fell 1.4% year on year, marking the 40th straight month of contraction.
These China figures increased expectations for more fiscal and monetary support, which can boost antipodean currencies. However, New Zealand’s higher unemployment rate in Q4 2025 reduced the likelihood of tighter Reserve Bank of New Zealand policy and could limit further NZD/USD gains.
NZD/USD is now testing a two-week high near 0.6065, driven mainly by broad US Dollar weakness. The key near-term catalyst is the upcoming US Nonfarm Payrolls (NFP) report, which could trigger a sharp move. This setup may appeal to options traders looking to position for potential volatility.
Options Positioning Ahead Of Nfp
Bearish sentiment on the Dollar is tied to strong expectations for Federal Reserve rate cuts. Fed funds futures currently price in an 85%+ chance of at least one rate cut by the Fed’s June 2026 meeting. This has pushed the US Dollar Index (DXY) below 103.00, an important psychological support level.
Several NFP reports in the second half of 2025 triggered sharp, multi-day reversals in major currency pairs. That history suggests option straddles—strategies that can profit from a large move in either direction—may be a sensible way to trade the event risk. A payrolls number that is far from the consensus forecast will likely shape the Dollar’s direction for the rest of February.
The New Zealand Dollar also faces challenges that may limit upside. The rise in New Zealand’s unemployment rate to 4.3% in Q4 2025 has largely removed the case for Reserve Bank of New Zealand rate hikes. Along with ongoing deflation pressure from China, New Zealand’s biggest trading partner, this suggests the Kiwi’s strength could be fragile.
Given this backdrop, traders may consider buying near-term NZD/USD call options to take advantage of the current upward momentum into the NFP release. However, these positions should be hedged with put options or backed by a clear exit plan. A stronger-than-expected US jobs report would quickly challenge the rate-cut story and could send the pair sharply lower.
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