The New Zealand dollar (NZD) has recently faced downward pressure, influenced by shifting market risk appetite despite the unexpected improvement in domestic business confidence. Analysts indicate that the NZD is likely to continue its decline, particularly in light of New Zealand's inflation hitting 3% in Q3 2025, which aligns with the upper limits of the Reserve Bank of New Zealand's (RBNZ) target range. In a proactive move, the RBNZ reduced its official cash rate by 50 basis points to 2.5% as a response to economic softness and rising living costs. This adjustment suggests that the central bank is prioritizing economic stimulus over inflation control, which could further weigh on the NZD.
Most recently, the NZD to Singapore dollar (SGD) exchange rate has reached 7-day lows around 0.7426, which is 1.4% below its three-month average of 0.7534. This decline reflects a stable three-month trading range between 0.7407 and 0.7661, suggesting that the market is sensitive to the broader economic conditions and policy shifts in both New Zealand and Singapore.
In contrast, the Singapore dollar has maintained a more robust position, buoyed by economic resilience and a strong Q3 GDP growth rate of 2.9%, significantly exceeding expectations of 1.9%. The Monetary Authority of Singapore (MAS) has kept its monetary policy unchanged, projecting confidence in this growth despite external uncertainties. Additionally, easing inflationary pressures have led the MAS to revise its core inflation forecast downward, which may further stabilize the SGD.
Overall, recent developments indicate a challenging outlook for the NZD against the SGD. With the RBNZ's aggressive rate cuts and potential economic slowdowns weighing on the NZD, coupled with Singapore's resilient economic performance and stable policy settings, the NZDSGD exchange rate may continue to favor the SGD in the near term. Investors and businesses engaged in international transactions should remain vigilant and consider these dynamics when planning their currency strategies.
