New Zealand had a trade deficit of NZ$1.19 billion in August, which is a big jump from the NZ$578 million shortfall in July. Over the last year, the overall deficit dropped to NZ$2.99 billion, down from NZ$3.94 billion earlier. Exports fell to NZ$5.94 billion from NZ$6.71 billion in July. At the same time, imports went down slightly to NZ$7.12 billion, compared to NZ$7.28 billion the month before.

Trade Deficit Implications

The growing monthly trade deficit is likely to have a negative impact on the New Zealand dollar in the short term. The significant drop in exports is particularly worrying, indicating that global demand for New Zealand’s goods is weakening. This trend may put downward pressure on the currency against major partners like the US dollar. This decline in exports coincides with ongoing reports of a slowdown in China, which is New Zealand’s biggest export market. In August 2025, China’s Manufacturing PMI fell back into contraction at 49.8, indicating less demand for the raw materials we provide. Looking at past patterns from 2022, a slowdown in China negatively affected the NZD. The slight decline in imports also hints that domestic demand in New Zealand might be weakening. This reduces pressure on the Reserve Bank of New Zealand to raise interest rates further, which has helped support the currency in the past year. We believe the market will now adjust its outlook on any potential interest rate increases, removing an important support for the NZD.

Trading Strategies for NZD

For traders, the current situation favors strategies that can profit from a falling or stable NZD. We suggest buying put options on the NZD/USD as a smart way to prepare for a potential decline while limiting risk. The one-month implied volatility has recently risen to 9.8%, which means the market is anticipating more fluctuations; however, this is still moderate compared to historical levels. The narrowing annual deficit serves as a caution against overly aggressive bearish positions. This longer-term improvement indicates some resilience that could prevent a sharp drop in currency value. A bear put spread—which profits from a moderate decline in the NZD, while minimizing potential losses and entry costs—may be a more sensible approach than selling futures outright. Create your live VT Markets account and start trading now.

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