New Zealand dollar extends gains, last up 0.7% at USD 0.6031

New Zealand dollar extends gains, last up 0.7% at USD 0.6031

The New Zealand dollar (NZD) has extended its recent gains, closing at USD 0.6031 on Friday, May 26, 2025, an increase of 0.7% from the previous close. This upward trend is driven by several factors, including a robust trade surplus, increased government spending on defense and infrastructure, and a potential interest rate cut by the Reserve Bank of New Zealand (RBNZ).

New Zealand recorded a trade surplus of $1.43 billion in April 2025, a significant turnaround from the $3 million deficit reported in the same month a year earlier. Exports surged 25% year-over-year, fueled by strong demand for commodities such as milk powder, butter, and cheese, as well as logs and wood products [2].

The New Zealand government's budget for 2025 has also been a catalyst for the NZD's performance. The budget includes a substantial boost in funding for the Defense Force, with a $4.2 billion increase over four years, aiming to reach 2% of GDP by 2033 [1]. Additionally, the government has allocated $200 million over four years for co-investment in new gas fields, which will see the state take a 10% to 15% stake in new gas-field developments [1].

The RBNZ is expected to cut its cash rate by 25 basis points, bringing it down to a new level, amid signs of economic recovery. This move is aimed at supporting economic growth and encouraging investment in the country [3].

The NZD's performance is also influenced by global economic developments and geopolitical factors. The recent U.S. credit rating downgrade and trade tensions have led to a broader decline in the U.S. dollar, benefiting the NZD [3].

In summary, the NZD's gains can be attributed to a combination of domestic economic policies, strong trade performance, and global economic trends. As the economic recovery continues, the NZD is expected to maintain its upward momentum.

References:
[1] https://www.bloomberg.com/news/articles/2025-05-22/new-zealand-budget-2025-winners-and-losers
[2] https://www.tradingview.com/news/te_news:459448:0-new-zealand-swings-to-strong-trade-surplus-in-april/
[3] https://www.investing.com/currencies/nzd-usd