NZD outperforms thanks to rebound in Chinese yuan
Daily Currency Update
The New Zealand dollar was one of the best performers through trade on Tuesday, outpacing major counterparts, buoyed by a stronger Chinese yuan and weaker US dollar. The RBA's decision to leave rates on hold had little spillover impact on NZD values and markets larger ignored a weaker-than-anticipated GDT dairy auction in which prices suffered their largest fall since early April. A key export, the weak auction result does not bode well for NZ in terms of trade but did little to dampen demand for the NZD. Having tracked between US$0.6140 and US$0.6160 through the early part of the domestic session the NZD surged toward US$0.62 on the heels of a stronger Chinese yuan. The CNH traded at its strongest level in the last 7 days, forcing the USD back toward ¥7.23 after the People's Bank of China again set a stronger-than-anticipated reference rate. The persistent program of intervention and reports China's state banks are offering long-dated loans with interest rate relief in a bid to relieve credit crunch stresses helped bolster risk appetite and spur demand for the NZD. With the US celebrating the 4th of July the dollar extended Monday's trading lower against most majors and adding support to the NZD rebound.Our attentions turn to China's Caixin PMI report and the US Federal Open Market Committee meeting minutes, where the Fed paused its rate hike cycle. We expect the NZD will continue to track between US$0.61 and US$0.63.
Key Movers
The US dollar index was stronger through trade on Tuesday, yet much of the upside came on the heels of a euro downturn and the dollar actually traded lower against the GBP, JPY and commodity currencies. With the US on holiday in observance of the 4th of July celebrations, liquidity and volumes were thin and markets seemed content in extending Friday's dollar downturn. There appears little catalyst for the euro correction as European rates edged higher and there is no headline data to drive the downward correction. Having given up supports at US$1.09 the single currency slipped toward intraday lows at US$1.0880 while giving up ground to all key crosses.Our attentions turn now to China's Caixin PMI report and the US Federal Open Market Committee meeting minutes, where the Fed paused its rate hike cycle. With ample commentary offered from Fed officials since the June policy announcement we expect few surprises in the minutes and instead will be looking between the lines for greater guidance on a possible peak in Fed Fund pricing. Any indication the Federal Open Market Committee is nearing the end of its tightening cycle will likely weigh on the USD and help fuel demand among major counterparts.
Expected Ranges
- NZD/USD: 0.6100 - 0.6230 ▲
- NZD/EUR: 0.5640 - 0.5750 ▲
- GBP/NZD: 2.0380 - 2.0620 ▼
- NZD/AUD: 0.9180 - 0.9320 ▲
- NZD/CAD: 0.8120 - 0.8220 ▲