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NZD buoyed as investors commit to risk-on recovery

Friday 27 August, 2021

Daily Currency Update

NZD - New Zealand DollarThe New Zealand dollar outperformed most counterparts through trade on Wednesday, enjoying the revitalised risk-on agenda. Amid a backdrop of rising commodity prices and uptick across equity markets, the NZD pushed through 0.6950 marking fresh intraday highs at 0.6985 and appears poised to push back through 0.70 US cents should investors maintain their positive sentiment. Having tested 0.68 last week, the NZD has recouped much of the risk-off losses while enjoying strong gains against key crosses. The NZD/JPY was the day's biggest mover as risk appetite drove demand for the NZD and prompted a sell-off across haven assets. Sentiment continues to drive direction and as long as the pandemic continues to disrupt normality and the global economic engine, we expect the NZD and commodity currencies will enjoy ongoing periods of volatility. That said, the NZD’s positive domestic outlook and divergent central bank policy leave it well-placed to benefit from renewed risk demand. Our attentions turn to Friday’s Jackson Hole Symposium on monetary policy. Any insight into Fed policy and a planned tapering could disrupt direction into the weekend.

Key Movers

The US dollar remained on the back foot through trade on Wednesday giving up last week's risk-off gains as investors shifted out of haven assets and chased commodities and commodity currencies higher. The NOK, NZD and AUD all outperformed other major units, with the CAD being the only commodity-led currency to miss out, following campaign promises from Prime Minister Trudeau. Trudeau announced plans to raise taxes on banks and insurance companies while banning foreign home buyers for two years. The planned blackout for foreign investment in domestic real estate prompted the correction and forced the CAD back toward 0.79 US cents. The euro and GBP offer little to excite investors making small gains on the day. With little of note on today’s agenda, our attentions turn to Friday’s Symposium on Monetary Policy in Jackson Hole. While we anticipate the Federal Reserve President Jerome Powell will maintain the status quo and offer little new insight in a planned tapering of bond purchases, any insight or forward guidance has the potential to disrupt price action into the weekly close.

Expected Ranges

  • NZD/USD: 0.6890 - 0.7020 ▲
  • NZD/EUR: 0.5890 - 0.5950 ▲
  • GBP/NZD: 1.9630 - 1.9880 ▼
  • NZD/AUD: 0.9530 - 0.9630 ▲
  • NZD/CAD: 0.8720 - 0.8830 ▲