Kiwi Falls Despite China's Strong Services Data

The New Zealand Dollar (NZD) has been declining in value against the US dollar, despite stronger-than-expected services data from China. The NZD/USD pair closed lower for the second consecutive day below $0.5650, with a loss of over 4% in September.

The Reserve Bank of New Zealand (RBNZ) raised its Official Cash Rate to 2.75% on September 2, but markets now predict an 80% chance of another hike to 3% on October 28. This would narrow the rate gap between NZD and USD from a full point to three-quarters of one.

Consumer confidence data is due out on Thursday, but it may not have as much impact on the NZD/USD pair as other US macroeconomic releases, including the ISM survey of US factories and Nonfarm Payrolls. These events move US yields, which have been driving NZD/USD movements all month.

The NZD's value is largely influenced by the health of its biggest trading partner, China, as well as domestic economic data. A strong economy with high growth, low unemployment, and high confidence supports a stronger NZD.