NZD/USD rose to around 0.5965 in Tuesday’s Asian session, supported by a weaker US Dollar. Markets are still focused on uncertainty around US trade policy. The US January Producer Price Index (PPI) is due on Friday.
Trade worries grew after the US Supreme Court struck down earlier emergency tariffs. President Trump then proposed a new 15% global tariff under Section 122 of the Trade Act.
Trade Policy Uncertainty Drives Volatility
The Wall Street Journal reported on Monday that the administration is also considering national security tariffs on about six industries. These would be issued under Section 232 of the Trade Expansion Act of 1962. They would be separate from the 15% global levy announced on Saturday.
In New Zealand, the Reserve Bank of New Zealand kept the Official Cash Rate unchanged at its February meeting. Governor Anna Breman said policy is still accommodative. The expected timing for the first possible rate hike has been pushed back to late 2026.
The RBNZ targets inflation between 1% and 3% over the medium term, with a goal of keeping it near 2%. The NZD is also influenced by China’s economic performance, dairy prices, interest rate gaps versus the US, local data, and changes in overall market risk appetite.
For now, the main driver is US dollar weakness. New tariff proposals are adding uncertainty and have pushed NZD/USD toward 0.5965. This keeps the near-term momentum mildly bullish.
Options Approaches For The Near Term
However, there appears to be a clear ceiling on strong gains for the Kiwi. With the RBNZ signaling no hikes until late 2026, and with last quarter’s 2025 inflation easing to 2.5%, upside looks limited. One approach could be selling out-of-the-money call options above 0.6050 to collect premium.
Attention now turns to Friday’s US PPI report. If inflation comes in hotter than expected, the US dollar could rebound quickly and push the pair lower. Volatility strategies such as straddles may help position for a sharp move in either direction after the release.
New Zealand fundamentals also suggest caution. The latest Global Dairy Trade auction showed prices fell 1.2%, extending a softer trend that started in late 2025. That weighs on a major export sector and supports the view that upside in the currency may be limited.
We have seen similar conditions before, especially during the 2018 trade dispute period. Back then, headlines triggered fast and hard-to-predict currency swings. That history supports using defined-risk option spreads to manage risk in the weeks ahead.
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