NZD/USD Holds Above 0.5900 on Weak USD, Trade Surplus Boosts Kiwi

NZD/USD Consolidates Above 0.5900 on Soft USD and Trade Surplus, But Faces Headwinds from US-China Tensions

The NZD/USD currency pair edged higher on Wednesday, trading around 0.5935 during the early Asian session, marking a modest 0.18% gain on the day. The New Zealand Dollar (NZD) received support from both a softer US Dollar (USD) and better-than-expected trade data out of New Zealand. However, growing geopolitical tension between the US and China continues to act as a potential cap on further upside.

New Zealand Trade Surplus Surprises to the Upside

According to data from Statistics New Zealand, the country posted a trade surplus of NZ$1.426 billion in April, sharply higher than the NZ$794 million surplus recorded previously and well above market expectations of NZ$500 million. The jump was primarily driven by strong dairy and fruit exports, reinforcing the resilience of New Zealand's agricultural sector.

Despite the monthly gain, the year-on-year trade balance still shows a significant deficit of NZ$4.81 billion, highlighting ongoing structural imbalances in the external trade environment.

US Dollar Weakness Offers Additional Tailwind

The US Dollar continues to trade on the back foot, weighed down by lingering concerns over the country's fiscal health and rising debt levels. The recent downgrade of US sovereign credit by Moody's has added to investor caution, leading to broader USD softness across currency markets.

Market participants are also awaiting a speech from Federal Reserve official Thomas I. Barkin later in the day, looking for clues on future monetary policy direction amid a slowing US economy.

US-China Tensions Remain a Limiting Factor

While the Kiwi enjoys short-term support, fresh friction between Washington and Beijing could limit further appreciation. On Wednesday, China’s Ministry of Commerce strongly criticized the latest US restrictions on Chinese high-end semiconductor chips, labeling them as “typical of unilateral bullying and protectionism.” Chinese authorities demanded that the US immediately reverse these measures and respect international trade norms.

Meanwhile, the Geneva tariff deal saw the US reduce its duties on Chinese goods from 145% to 30%, and China cut its rate from 125% to 10%. However, tariff uncertainty persists, adding to market risk sentiment and limiting aggressive buying of risk-sensitive currencies like the NZD.

Outlook

The NZD/USD pair may find short-term support above the 0.5900 psychological level, especially if the US Dollar continues to weaken. However, rising geopolitical risk and cautious global sentiment could keep gains limited in the near term unless trade tensions de-escalate or further domestic data supports the Kiwi.