Kiwi gives up gains as USD bounces off three-year lows
Friday 8 January, 2021
Daily Currency UpdateNZD - New Zealand DollarThe New Zealand dollar opens in relatively the same position as yesterday having given up the days early domestic session gains. The NZD surged toward 0.73 US cents throughout the first few hours of the domestic session but failed to hold onto gains, steadily edging back toward 0.7250 amid broader US dollar strength. Investors sought to unwind some of the recent USD bearish bets, buoyed by hopes democrats, who now control both the house and senate, will proffer increased stimulus measures in a bid to rebuild the economy and guide the US out of this pandemic. US treasury yields pushed back above 1% for the first time in 10 months and could suggest a shift in the underlying undercurrent of direction. While we still expect ongoing NZD upside, a short-term consolidation of recent moves is certainly on the table as markets look to take stock and assess expectations amid a broader global vaccination roll out. Watch resistance on moves approaching 0.73 with support on moves below 0.7150.
Key MoversThe US dollar bounced off near three-year lows through trade on Thursday to mark fresh weekly highs, amid optimism for an economic rebound and a broader euro sell off. The dollar index advanced over half a percent and closed in on a break back above 90, as investors responded to expectations a Biden government will provide more stimulus measures to bolster the economic recovery, while bond yields edged higher with treasury yields climbing above 1% for the first time in 10 months. While the broader medium-term view remains bearish, there is scope to suggest the pace of depreciation could now stall, with resistance on moves approaching the March 2018 low. The euro gave up the weeks early gains, drifting back below 1.23 as investors sought to absorb profits, capitalising on the recent appreciation. The pound again failed to extend beyond 1.36 as national lockdown measures curb Q1 economic expectations and analysts begin pricing in a shift to negative interest rates. Having climbed above 1.37 this week, sterling slipped to intraday lows at 1.3537 overnight. With the British health system overrun and lockdowns expected to remain in place, as officials try and control this latest outbreak, analysts have brought forward expectations for Bank of England policy action, pricing in a shift to negative rates before H2, most likely May. As pressure grows and the economy continues to struggle we expect extensions beyond the May 2018 high may he hard won.
- NZD/USD: 0.7150 - 0.7300 ▼
- NZD/EUR: 0.5850 - 0.5980 ▼
- GBP/NZD: 1.8580 - 1.8820 ▲
- NZD/AUD: 0.9320 - 0.9390 ▲
- NZD/CAD: 0.9170 - 0.9260 ▼