The New Zealand Dollar (NZD) traded higher against the U.S. Dollar (USD) on Tuesday, with NZD/USD hovering near 0.5905 in early Asian hours. The Kiwi found support from stronger-than-expected Chinese manufacturing data, though lingering trade tensions and U.S. policy uncertainty continue to cap upside momentum.
Chinese PMI surprise lifts Kiwi
China’s August Caixin Manufacturing PMI climbed to 50.5 from July’s 49.5, beating market expectations of 49.5 and marking an expansion in factory activity. The stronger reading bolstered sentiment toward the China-proxy New Zealand Dollar, given the close trade ties between Wellington and Beijing.
Fed policy expectations pressure Dollar
In the U.S., July’s Personal Consumption Expenditures (PCE) report showed inflation edging higher, reflecting the impact of President Donald Trump’s tariffs on consumer prices. Despite this, markets remain convinced the Federal Reserve will resume rate cuts in September, a view that continues to weigh on the Dollar and provides a tailwind for NZD/USD.
Traders will closely watch Tuesday’s ISM Manufacturing PMI for fresh signals on U.S. economic momentum and policy direction.
Trade uncertainty remains a headwind
While Chinese data has provided short-term relief, ongoing global trade tensions remain a key risk for the Kiwi. The U.S. Court of Appeals recently upheld a ruling that Trump’s unilateral tariffs on multiple countries were illegal, a decision impacting levies on major U.S. trading partners including China, Mexico, and Canada. Trump vowed to appeal to the Supreme Court, prolonging uncertainty in global trade and keeping NZD/USD gains in check.
Outlook
NZD/USD is holding firm above 0.5900, supported by improved Chinese data and dovish Fed expectations. However, the pair’s upside potential may remain constrained by trade policy risks and upcoming U.S. data releases. A strong ISM print could revive Dollar demand, while softer figures may reinforce downside pressure on the greenback, allowing the Kiwi to extend gains.
