The NZD/USD is nearing a four-month high of 0.5850 as the US Dollar weakens. This shift is influenced by geopolitical tensions and unpredictable US trade policies, affecting how investors feel. We’re noticing a trend called “Sell America” where the US Dollar is impacted by Trump’s interest in Greenland and his tariffs on other nations. US Treasury officials and Danish ministers are urging calm and addressing the strained relations between the US and EU.

New Zealand Economic Indicators

In New Zealand, the BusinessNZ Performance of Services index increased to 51.1 in December from 49.6 in November, indicating economic growth after a long contraction period. Additionally, China’s economy grew by 4.5% year-on-year in Q4, with industrial production up by 5.2%. However, the retail and housing sectors face challenges. The New Zealand Dollar (NZD) is shaped by the country’s economic health and central bank policies. China’s economy, as New Zealand’s largest trading partner, also plays a significant role. Dairy prices, vital for New Zealand’s exports, further influence the NZD. The Reserve Bank of New Zealand (RBNZ) impacts the NZD through interest rate decisions, affecting its market appeal. Macroeconomic data and overall investor sentiment also contribute to the NZD’s value, with the currency performing better in a stable economic environment. Looking back on January 20, 2026, the events of 2025 remind us how quickly geopolitical risks can affect the US Dollar. Last year, tensions around Greenland led to a widespread “Sell America” trend, pushing the NZD/USD down to 0.5850. Currently, with the pair trading higher at around 0.6150, the fundamental drivers appear consistent, suggesting further growth is likely.

US Dollar Challenges

The US Dollar is facing challenges again, but for different reasons than last year’s Greenland incident. Uncertainty from upcoming US mid-term elections and renewed trade issues with Southeast Asia have increased market fear, pushing the VIX up to 18 from an average of 14 last quarter. This political instability is negatively affecting the dollar, similar to how Trump’s unpredictable policies impacted it in 2025. On the flip side, the New Zealand economy remains robust, providing support for the Kiwi. In the fourth quarter of 2025, New Zealand’s inflation was a stubborn 3.6%, well above the RBNZ’s target, causing more aggressive comments. In contrast, the US’s Core PCE inflation was only 2.5% in December, prompting the Federal Reserve to signal a continued pause on interest rates. The Kiwi also benefits from its largest trading partner, China, which appears economically more stable than last year. China’s latest official manufacturing PMI was 50.9, showing three months of growth and increasing demand for New Zealand’s commodities. This creates a better backdrop for the NZD compared to the mixed Chinese data from early 2025. Given the difference between a hawkish RBNZ and a neutral Fed, traders may want to consider positioning for continued NZD/USD strength. Buying call options with a strike price around 0.6250 for March expiration provides a way to capture potential gains while managing risk. This environment resembles the 2025 setup, but the support for the Kiwi is even stronger now. However, we should stay alert to specific risks for New Zealand, especially in its dairy sector. The latest Global Dairy Trade auction surprisingly showed a 1.8% drop in prices, potentially creating short-term challenges for the Kiwi dollar. Therefore, using option spreads, like a bull call spread, may be a wiser strategy to protect against any pullbacks from fluctuating commodity prices. Create your live VT Markets account and start trading now.

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