The New Zealand dollar (NZD) has recently shown signs of weakness, influenced by a decline in market risk appetite despite some positive domestic developments. Following a notable increase in business confidence, the NZD slid as traders prioritized broader market trends over domestic bullish signals. Analysts suggest that continued deterioration in global risk sentiment may exacerbate losses for the ‘kiwi’ in the immediate term.
Inflation metrics have drawn attention, with New Zealand reporting a 3% annual inflation rate in Q3 2025, aligning with the Reserve Bank of New Zealand's (RBNZ) target range. However, concerns over economic performance have prompted the RBNZ to cut its official cash rate by 50 basis points, aiming to stimulate growth amidst rising costs. The central bank forecasts that inflation may moderate to around 2% by mid-2026, indicating a cautious outlook for economic recovery.
Additionally, plans to ease home lending regulations may bolster domestic demand, particularly as housing prices reach more sustainable levels. Strengthening regional trade relationships amid U.S.-China tensions may also provide some support for the NZD.
Conversely, the value of the CFP franc (XPF) has shown resilience, with projections for its exchange rate to stabilize at approximately 102.31 against the USD by the end of this quarter. New Caledonia’s stable interest rates and a slight increase in the inflation rate could bolster confidence in the XPF.
Currently, the NZD to XPF exchange rate stands near 58.80, reflecting a 1.6% dip below its three-month average. This level, situated within a stable trading range of 58.44 to 61.05, suggests a precarious position for the NZD, especially if risk aversion persists. Analysts will continue to monitor these economic indicators closely as they assess the trajectory of both currencies.
