Daily Currency Update
The New Zealand dollar edged higher through trade on Thursday, consolidating a break above US$0.61 and closing in on another test of US$0.62. With little headline data on hand to drive direction, markets responded to speculation the Bank of Japan may be preparing to exit its negative rates policy. Conjecture the Bank of Japan could adjust its monetary policy framework before year-end sparked a USD shorting and led an NZD rebound through the back end of local session and overnight trade. Having marked intraday highs at US$0.6188 the NZD tracked sideways into this morning’s open with near-term direction now solely driven by US labour market performance. We have highlighted the importance of US policy expectations in shaping near-term NZD direction and a softening in US labor market performance could afford the Kiwi the opportunity to test new highs, supporting calls for the Fed to end its tightening cycle and forecast easier monetary policy through 2024. With markets trading sideways into tonight’s release we expect ample price action leading into the weekly close.
Key Movers
The Japanese yen was the big mover yesterday amid a surge in speculation the Bank of Japan (BoJ) may be contemplating a series of exit options before the year is out. BoJ governor Ueda highlighted the challenges of managing the current monetary policy program in 2024 in a parliamentary address, while deputy governor Himino suggested existing the negative rate policy framework will have little impact on Japan’s economy. The comments sparked a surge in Japanese government bonds and short selling on USD/JPY. The dollar fell 2.5%, marking lows at 141.71 before settling near 143. Yen strength drove broad USD weakness with the DXY index falling over half a percent and affording other majors the chance to claw back early week losses ahead of tonight’s all important non-farm payroll print. With the USD on the back foot, our attentions are squarely affixed to US labour market performance for direction into the weekly close.
Expected Ranges
- NZD/USD: 0.6080 - 0.6250 ▲
- NZD/EUR: 0.5650 - 0.5780 ▲
- GBP/NZD: 2.0300 - 2.0600 ▼
- NZD/AUD: 0.9280 - 0.9380 ▼
- NZD/CAD: 0.8320 - 0.8450 ▲