The NZD/USD pair has dipped below 0.5750, even with a 2.8% rise in New Zealand’s building permits for November, reversing a decline from October. Expectations are for China’s trade balance in December to widen to $113.60 billion, which could affect the NZD since China is New Zealand’s biggest trading partner. During Asian trading hours on Wednesday, the pair continued to decline, hovering around 0.5730, despite the positive building permits data. With China’s exports and imports expected to rise, New Zealand’s economy and currency could be influenced due to their close trade ties.

Impact of the US Dollar

The US Dollar is gaining strength, even with low inflation that might lead the Federal Reserve to consider lowering interest rates. The US Core CPI increased by only 0.2% in December, which is below what was expected, indicating easing inflation. Strong Nonfarm Payrolls and falling unemployment rates highlight a solid labor market. Several factors affect the NZD, including China’s economic performance and dairy prices, which are New Zealand’s main exports. The Reserve Bank of New Zealand makes interest rate decisions to keep inflation between 1% and 3%, influencing the value of the NZD. Economic growth data and risk sentiment also impact the NZD’s value, with stronger economies boosting the currency. By late 2025, the NZD/USD struggled to stay above the 0.5750 mark, pressured by a surprisingly strong US Dollar despite softer inflation numbers. The market was eagerly awaiting Chinese trade data for guidance on the commodity-linked Kiwi dollar, setting the stage for ongoing weakness as the new year approached. Last week’s expected Chinese trade data for December disappointed the market. Exports grew by only 1.4% year-over-year, below the 3.0% forecast, indicating weaker global demand and affecting New Zealand’s economic outlook. This confirmed the negative sentiment for the NZD that had been building at the end of the previous year.

Market Influences

Moreover, the Global Dairy Trade auction on January 6th revealed a price index drop of 1.9%, marking the second consecutive decline. Falling dairy prices are a significant challenge for the New Zealand Dollar. Historically, ongoing declines in dairy prices have preceded periods of NZD/USD weakness, as seen during the downturn in mid-2023. On the US Dollar side, it continues to find support. The strong Nonfarm Payrolls report from December 2025 showed that the US economy added 216,000 jobs, leading markets to postpone expectations for a Federal Reserve rate cut until the second quarter of 2026. This widening interest rate difference makes holding US Dollars more appealing than New Zealand Dollars. Given these challenges, traders may want to consider strategies that could benefit from further weakness in NZD/USD in the upcoming weeks. Buying put options with strike prices below 0.5700 offers a defined-risk strategy for those expecting a continued decline. For those with a neutral-to-bearish outlook, selling call option spreads above the 0.5750 resistance level could be a good way to earn premium as the pair remains capped. Create your live VT Markets account and start trading now.

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