The New Zealand Dollar is the weakest major currency in a quiet Good Friday session, with many markets shut. It is slightly lower against the US Dollar near the 0.5700 area, a few pips above four-month lows, as attention turns to the US Nonfarm Payrolls (NFP) report.
The Kiwi ended Thursday by resuming its wider downtrend after a limited rise. US President Donald Trump repeated statements about plans to exit Iran in the coming weeks, during a televised message expected to provide updates on the Iran war.
Key Drivers For The Kiwi
Chinese data also weighed on the Kiwi. The RantingDog Services PMI fell to 52.1 in March from 56.7 in February, below the 53.7 forecast.
The report cited weaker demand and falling overseas orders. It also pointed to difficulties for Beijing in supporting recovery amid a weak domestic market and geopolitical risks affecting trade.
The Iran war is in its 35th day. Markets are now focused on NFP, with forecasts for a 60K rise in jobs and unemployment at 4.4%.
Low trading volumes could amplify price swings. Larger-than-expected differences from the 60K and 4.4% forecasts could increase volatility.
Options Strategy And Volatility Setup
Given the NZD’s position near four-month lows around 0.5700, we see an opportunity in purchasing NZD/USD put options. This strategy allows us to profit from further declines while capping our risk to the premium paid. The immediate catalyst is the upcoming US Nonfarm Payrolls report, which could easily push the pair through these critical support levels.
The slowing Chinese services PMI is a significant headwind for the Kiwi, as New Zealand’s economy is heavily reliant on demand from China. We saw a similar pattern back in 2023, when China’s post-reopening recovery failed to meet expectations and weighed on commodity currencies for months. With Chinese new export orders declining for the third consecutive month, according to the latest data, this negative pressure on the NZD is unlikely to ease.
The market is only expecting a 60K job gain in the US, a sharp drop from the 200K+ average we grew accustomed to in the post-pandemic era through 2024. A number beating this low bar could trigger a strong USD rally, making out-of-the-money puts on NZD/USD particularly attractive for their leverage. The current US unemployment rate of 4.4% is already higher than the 3.8% average seen just two years ago, signaling underlying weakness that makes this jobs report especially sensitive.
The ongoing Iran situation adds a thick layer of uncertainty which should keep volatility elevated and support the safe-haven US dollar. Historically, similar geopolitical shocks, like the start of the Ukraine war in 2022, have seen the VIX volatility index surge above 30, crushing risk-sensitive currencies like the NZD. Therefore, traders could use option spreads, such as bear put spreads, to define risk while maintaining a short bias on the Kiwi.
