New Zealand dollar trades below US$0.62
Wednesday 22 March, 2023
Daily Currency UpdateThe New Zealand dollar is slightly weaker this morning when valued against the US dollar. In currency markets overnight the New Zealand dollar was one of the worst performers, reversing course after being the greatest beneficiaries when US rates were heading lower. The NZD has fallen steadily, down over 1% to be back below the US$0.62 mark, currently US$0.6178. Its strong correlation to risk appetite over the past two years reversed through the recent turmoil. The US dollar regains some positive traction and snaps a three-day losing streak to its lowest level since February 14, which, in turn, is seen exerting downward pressure on the NZDUSD pair. Overall, NZDUSD remains on the bear’s radar but the pair’s further downside hinges on a US$0.6190 breakdown.
On the data front yesterday New Zealand's Trade Balance data for February was released, with exports at $5.23 billion, down from $5.47 billion previously, and imports at $5.95 billion compared to $7.42 billion previously. We also saw the release of New Zealand Credit Card spending. Seasonally adjusted domestic billings on New Zealand issued cards rose from $3.8 billion in January to $4.0 billion in February. Total credit limits were $21.3 billion (not seasonally adjusted), similar to January. Total credit limits were 1.5% lower than in February 2022. The latest GDT dairy auction showed pricing down 2.6%, the sixth drop over the past seven auctions. Prices for all the products on offer fell, with whole milk powder down 1.5% and skim milk powder down 3.5%.
Key MoversAll eyes this week will remain glued to the outcome of the highly-anticipated two-day Federal Open Market Committee (FOMC) monetary policy meeting, scheduled to be announced on Wednesday. This will play a key role in influencing the near-term USD price dynamics and determining the next leg of a directional move. The US Federal Reserve on Tuesday began its two-day deliberations with investors across the globe awaiting policymakers' decision on key interest rates in its aggressive fight against inflation amid an ongoing banking crisis. Another interest rate hike would risk exacerbating the banking crisis that began with the failure of the Silicon Valley Bank on March 10. Not raising it, as many Fed watchers and market experts are hoping, may lead to a resurgence in inflation sending wrong signals as well. Markets had previously expected the Fed to raise rates by 25 basis points in its March 21-22 FOMC meeting, but Powell’s earlier testimony to Congress sent market signals of a 50 basis points hike as the chief sounded hawkish. Expectations of a larger rate hike vanished after the news of the banking crisis erupted. At the previous meeting, the US Fed raised interest rates by a quarter percentage point, bringing the Fed funds rate to the 4.50%-4.75% range. Previously, the US Fed gave four consecutive 75 basis points rate hikes and then a 50 basis points increase in December, followed by a 0.25% hike in January.
- NZD/USD: 0.6100 - 0.6300 ▼
- NZD/EUR: 0.5650 - 0.5850 ▼
- GBP/NZD: 1.8200 - 1.8400 ▲
- NZD/AUD: 1.0650 - 1.0850 ▼
- NZD/CAD: 0.8400 - 0.8600 ▲