**NZD/USD Rises as US Dollar Weakens** All eyes are on the Federal Reserve meeting scheduled for Wednesday. No changes to interest rates are expected, but market watchers will analyze the Fed’s statements and Chair Jerome Powell’s comments for clues about future monetary policy. In New Zealand, economic factors are boosting the New Zealand Dollar (NZD). Recent inflation data was higher than anticipated, raising questions about a possible interest rate hike by the Reserve Bank of New Zealand (RBNZ). The NZD is showing strength, particularly against the Canadian Dollar. The heat map highlights a positive percentage change for major currencies, with the NZD rising against several of them today. This information is for informational purposes only and carries risks associated with currency investments. It does not suggest buying or selling any assets. Every investment decision should come after thorough research. **New Zealand Dollar Historical Analysis** Last year, the New Zealand dollar surged against a weak US dollar, pushing the NZD/USD exchange rate close to 0.6000. This rise in late 2025 was fueled by a hawkish RBNZ and political instability affecting the US dollar. However, the situation has changed as we enter 2026. The US dollar is now gaining strength, with the Dollar Index (DXY) climbing to around 105.50 from last year’s lows. This gain followed the release of the US Consumer Price Index for December 2025, which showed core inflation at 3.8%, above the Federal Reserve’s target. Additionally, a strong jobs report from early January, which added over 200,000 jobs, has led markets to rethink the likelihood of further Fed tightening rather than easing. Conversely, optimism for the kiwi has diminished. New Zealand’s Q4 2025 inflation data, released last week, showed a drop to 4.5%, reducing pressure on the RBNZ to be aggressive. As a result, the market no longer anticipates a rate hike in 2026, limiting the NZD’s strength. In light of these changes, it’s wise to consider strategies that could benefit from potential NZD/USD weakness in the upcoming weeks. Buying put options with a strike price around 0.5800 may be a low-risk way to profit if the pair continues to decline from its current level of about 0.5875. This approach protects against downward movement driven by a more hawkish Fed. For those expecting limited upside for the pair, selling call options or using a bear call spread strategy with a cap around the former 0.6000 resistance level could be effective. This strategy earns income from option premiums, taking advantage of the view that the policy gap no longer favors the kiwi. Shifting central bank perspectives suggest that implied volatility could rise, making options selling strategies more appealing. Create your live VT Markets account and start trading now.

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