Home Daily Commentaries New Zealand dollar falls below US$0.64

New Zealand dollar falls below US$0.64

Friday 16 December, 2022

Daily Currency Update

The Kiwi dollar is weaker this morning when valued against the Greenback. A slew of central policy meetings and hawkish updates from the Bank of England (BoE), the European Central Bank (ECB), and the Federal Reserve (Fed), saw equity investors and currency traders seeking the safe haven of the Greenback. The Kiwi dollar was one of the weakest performers overnight, falling over 2% to a low of US$0.6325. The Kiwi crosses have been mixed. After falling below the 0.94 mark yesterday, NZD/AUD pair is back up to 0.9460. The Kiwi dollar is relatively flat against the pound and Japanese yen but has slumped over 1% against the euro and the Canadian dollar to 0.5970 and 0.8640 respectively. On the local front yesterday, New Zealand Gross Domestic Product jumped by two per cent in the September quarter off the back of the return of business-as-usual air travel. The bumper result, released by Stats NZ on Thursday, was more than double the average market expectation of a 0.9% jump. Annual GDP growth to September 2022 was 2.7%. The size of the New Zealand economy is now NZ$375 billion (AU$353 billion). Service industries, which dominate the economy, were up 2.0% in the September quarter with the transport, postal and warehousing industry leading the way with 9.7% growth. Primary industry output fell by 0.2%, owing to a 0.8% fall in the agriculture, forestry and fishing sector.

Key Movers

Overnight in the UK the Bank of England pushed up its base rate by 0.5 percentage points to 3.5% despite saying inflation has peaked and Britain is about to enter “a prolonged recession". The Bank hiked interest rates on Thursday for the ninth time in a year, to the highest level in 14 years, but told borrowers to prepare for fresh increases in the new year. Members of the Bank’s monetary policy committee (MPC) voted to increase the cost of borrowing after the consumer price index (CPI) in November showed annual inflation of 10.7%. Governor Andrew Bailey said a fall in CPI from 11.1% in October represented “the first glimmer” that inflation had begun to ease and he expected a rapid fall, “probably from the late spring onwards”. His comments, which appeared to show further rate rises could peak below forecasts of 4.5% by the end of next year, sent the pound tumbling against the dollar by 2 cents. The US dollar soared to fresh weekly highs against most major rivals, ending the day with substantial gains amid a risk-averse environment. On the local data front the US reported November Retail Sales, which plunged by 5.9% YoY, while Industrial Production in the same period rose by 2.2%, below the 3.6% expected. The Greenback also benefited from hawkish US Federal Reserve Chairman Jerome Powell's hawkish comments reacting to the recent US Fed's decision.

Expected Ranges

  • NZD/USD: 0.6250 - 0.6450 ▼
  • NZD/EUR: 0.5850 - 0.6050 ▼
  • GBP/NZD: 1.9100 - 1.9300 ▲
  • NZD/AUD: 1.0450 - 1.0650 ▲
  • NZD/CAD: 0.8550 - 0.8750 ▼