NZD resilient as RBNZ proffers hawkish tone

Daily Currency Update

The New Zealand dollar enjoyed mixed fortunes through trade on Wednesday, buoyed by hawkish RBNZ before China fears and a risk-off mood engulfed markets. While the RBNZ opted to leave rates on hold at 5.5%, policymakers increased their expectations for the peak overnight Cash rate from 5.5% to 5.59% through June 2024. While giving no signal of when further rate hikes might be issued, the suggestion the RBNZ is not necessarily finished with its tightening cycle helped fuel demand for the NZD driving the Kiwi toward intraday highs just south of US$0.60. Having touched US$0.5990, the NZD faded through the latter half of the domestic session and overnight amid higher US yields and more negative China news. Reports Chinese authorities have requested investment funds avoid being net sellers this week amid rising concerns property market uncertainty will permeate the broader economy. News Zhongrong International Trust, one of China’s largest shadow banks, had missed several payments owing on investment products which elevated fears the crisis is spreading to the financial sector. The Yuan fell again against the USD and is now just short of the 2022 peak at 7.3280. The risk-off mood forced the NZD back toward US$0.5950.

With little of note on the domestic docket outside PPI data, our attentions remain with China headlines and the broader risk narrative.