Forex News: NZ Dollar Falls Amid Risk-off Mood

NZ Dollar Falls Amid Risk-off Mood

(RTTNews) - The New Zealand dollar weakened against other major currencies in the Asian session on Wednesday amid risk-off mood, with several markets in the Asia-Pacific region closed for New Year's Eve.

Markets in South Korea, Japan and Thailand are closed on account of New Year's Eve. Markets in Australia and New Zealand closed early today. Hong Kong will also shut early.

Investors continue to be worried with the growing conflict between Taiwan and China. In response to an agreement with the U.S. about a $11 billion military aid package for Taipei, Beijing has initiated extensive military exercises throughout the island, including live missile-firing drills. Fears of a regional escalation were rekindled when Taiwanese officials verified the deployment of their missile systems.

In economic news, data from S&P Global showed that China's manufacturing activity rebounded in December as output returned to growth amid higher inflows of new work.

The RatingDog headline factory Purchasing Managers' Index posted 50.1 in December, up from 49.9 in November. A score above 50.0 indicates expansion.

The official survey showed that both manufacturing and non-manufacturing sectors recovered at the end of the year. The factory PMI rose to 50.1 from 49.2 in November, the National Bureau of Statistics said. The score was seen unchanged at 49.2.

Similarly, the non-manufacturing PMI advanced to 50.2 from 49.5 in the previous month. Economists forecast the index to rise slightly to 49.6.

Later in the day, traders are anticipating the U.S. Initial Jobless Claims report.

At its December policy meeting, the U.S. Federal Reserve (Fed) lowered the federal funds rate by 25 basis points (bps), reducing the target range to 3.50%-3.75%. In 2025, the U.S. central bank lowered interest rates by a total of 75 basis points as the job market cooled and inflation was marginally higher.

Minutes from the Fed's December 9-10 meeting show that while most Fed officials disagreed on when and how much to drop interest rates, they agreed that further reductions were justified as long as inflation decreased over time.

According to the CME FedWatch tool, the likelihood of a January cut based on federal funds futures contracts decreased marginally to roughly 15% after the release of the FOMC minutes.

In the Asian trading today, the NZ dollar fell to nearly a 2-week low of 90.37 against the yen and more than a 1-1/2-month low of 1.1588 against the Australian dollar, from yesterday's closing quotes of 90.60 and 1.1558, respectively. If the kiwi extends its downtrend, it is likely to find support around 89.00 against the yen and 1.16 against the aussie.

Against the U.S. dollar and the euro, the kiwi dropped to 9-day lows of 0.5777 and 2.0328 from Tuesday's closing quotes of 0.5792 and 2.0282, respectively. The kiwi may test support near 0.56 against the greenback and 2.04 against the euro.

Looking ahead, U.S. MBA mortgage approvals data, U.S. weekly jobless data and U.S. EIA crude oil data are slated for release in the New York session.

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