Daily Currency Update
The New Zealand dollar closed Thursday as one of the best performers among G10 currencies, pushing off 2023 lows and a break below US$0.58. The NZD continued Wednesday night’s sell-off through the early hours of the domestic session, marking new lows at US$0.5775 before finding support and turning upward. Having pushed back toward US$0.58 by the end of the local session the NZD extended the recovery on the heels of a downturn in US yields. The USD followed two- and ten-year rates lower allowing the NZD to mark intraday highs at US$0.5829. Despite the rebound the NZD remains under pressure. It continues to mark a series of lower lows and lower highs suggesting momentum remains negative through the short term. A consolidated break below yesterday’s low could open the door for an extended correction toward the October 2022 low near 0.5560. While our focus remains with yield performance and rate expectations the ANZ consumer confidence survey, US PCE inflation data, and consumer sentiment reports provide colour into the weekly close.
Key Movers
Treasury yields, rate expectations and risk sentiment drove direction on Thursday, with the USD index flat despite a downward correction in 2- and 10-year rates. The euro is marginally lower after the ECB left rates on hold at 4%. With the result largely priced in, attentions moved to the accompanying statement which offered little by way of contrast to the September update, noting “interest rates are at a level that, if maintained for a sufficiently long duration, will bring inflation back to target.” This statement reinforced market expectations the tightening cycle is over, opening the door for a widening in the gap between US and Eurozone yields. The single currency slipped toward intraday lows at 1.0525 before finding support in lower US yields and pushing back above 1.0550. In other news the USD/JPY traded erratically yet held above 150. Investors are nervous after a previous move above this level prompted the Bank of Japan (BoJ) to intervene, while comments from Finance Minister Suzuki did little to calm sentiment. Suzuki noted that “we are watching FX moves with the same sense of urgency”. Our attentions are now squarely affixed to next week's BoJ policy meeting. While officials may choose to intervene beforehand, longer run BoJ policy and policy expectations will be key in controlling USD/JPY fortunes through the end of the year.
Expected Ranges
- NZD/USD: 0.5750 - 0.5880 ▲
- NZD/EUR: 0.5470 - 0.5580 ▲
- GBP/NZD: 2.0700 - 2.1000 ▼
- NZD/AUD: 0.9150 - 0.9250 ▲
- NZD/CAD: 0.7980 - 0.8120 ▲