Home Daily Commentaries NZD slide continues as stronger yuan fixing is not enough to stave off a robust US dollar

NZD slide continues as stronger yuan fixing is not enough to stave off a robust US dollar

Daily Currency Update

The New Zealand dollar tracked lower through trade on Thursday, faltering under the weight of stronger US data and higher global rates. Having tracked sideways through much of the domestic session the NZD did find support in the setting of a stronger CNY reference rate by the Peoples Bank of China (PBOC). After stepping aside yesterday the PBOC set a much stronger reference point through trade on Thursday in protest against the recent yuan depreciation. The move afforded the yuan support through the Asian session lifting the NZD toward intraday highs at US$0.61 before stronger US data drove a surge in 2 and 10-year treasury rates and lifted expectations for a July rate hike. The stronger USD forced the NZD toward intraday lows at US$0.6050 before supports helped lift the currency to US$0.6070 on open. With most counterparts underperforming against the USD, NZD crosses remain relatively flat, with the exception of the AUD. With the AUD boosted by stronger-than-anticipated May retail sales data, the NZD has fallen back below AU$0.92 to mark intraday lows at AU$0.9155.
Our attentions turn now to domestic consumer confidence data ahead of Tokyo CPI data, China PMI numbers, Euro area CPI, US consumer spending and core PCE deflator data for direction into the weekly close.

Key Movers

Stronger than expected US macroeconomic data helped fuel an upswing in US rates through trade on Thursday, bolstering demand for the USD overnight. US jobless claims fell last week, moving against expectations for a sustained lift in unemployment, while Q1 GDP estimates were revised up and the PCD deflator index, a key measure of inflation, was revised down. The string of stronger data seen in recent weeks shows the US economy is performing better than estimated, affording the Fed and Federal Open Market Committee ample scope to keep lifting interest rates. US rates surged overnight with the likelihood of the Fed delivering at least two more rate hikes through November rising. The USD was boosted by the stronger data sets reversing losses suffered earlier in the session to trade marginally higher on the day. The dollar toward intraday highs at ¥144.90 against the yen and is now perilously close to levels at which the Bank of Japan and Ministry of Finance have intervened. After eyeing a break toward €1.10 the euro slipped back below €1.09 after German and Spanish CPI data printed largely in line with consensus expectations denying European rates the ability to keep up with rising US treasury yields.
Our attentions turn now to tonight's Euro Area CPI print. With the European Central Bank hinting at an extended period of tightening policy conditions an elevated read could all but lock in a 50-point rate hike at next month's policy meeting.

Expected Ranges

  • NZD/USD: 0.6020 - 0.6120 ▼
  • NZD/EUR: 0.5520 - 0.5620 ▲
  • GBP/NZD: 2.0620 - 2.0920 ▼
  • NZD/AUD: 0.9120 - 0.9220 ▼
  • NZD/CAD: 0.7980 - 0.8080 ▼