Home Daily Commentaries New Zealand dollar trades below 59 US cents

New Zealand dollar trades below 59 US cents

Daily Currency Update

The New Zealand dollar is slightly stronger this morning when valued against the Greenback. NZD/USD pair traded up towards 0.5920 but retraced in line with a strengthening Greenback to close the week near 0.5870. Fears of a global economic slowdown led by Europe and China dented investors’ mood during the European session, but Wall Street opened in the green. This bolstered the NZD/USD, a gain of 0.57%.

In the meantime, the Kiwi has been influenced by market sentiment and negative data from China. The AUD/NZD pair is trading into two-week lows as the Aussie waffles against its close neighbour, the Kiwi dollar, with both currencies exposed to data impacts from China. With the cross trapped in a consolidation range between 1.0740 to 1.0940 for the past few months, a breakout was all but inevitable, and 1.0760 to 1.0740 will be the support range in the near term.

On the local data front this week, on Tuesday Statistics New Zealand will release the monthly Visitor Arrivals. Tourism plays an important role in the economy, about 7% of the population is employed by the tourism industry, and a sizable portion of the nation's GDP is indirectly related to tourism. On Wednesday we will see the release of the Food Price Index (FPI) for the month. Although food is among the most volatile consumer price components, this indicator garners some attention because New Zealand's major inflation data is released on a quarterly basis.

Finally, on Friday we will see the release of the BusinessNZ Manufacturing Index which is a survey of manufacturers that asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.

Key Movers

The US dollar remains robust, buoyed by the consistent flow of positive economic data concerning the state of the US economy. Last week, the labour data released on Thursday from the United States showed that as of September 1, US Initial Jobless Claims declined to 216K, indicating a decrease from the previous figure of 229K. This figure was lower than the expected rise of 234K.

Furthermore, in the second quarter (Q2), US Unit Labor Costs rose to 2.2%, up from the previous 1.6%, contrary to expectations of it remaining consistent. The US Federal Reserve (Fed) is anticipated to sustain elevated interest rates over a prolonged period. Furthermore, there is an expectation that the Fed will enact a 25 basis point (bps) interest rate hike by the end of the year 2023.

In the UK on Friday, the GBP extended its free fall for four straight days versus the US dollar due to high US bond yields underpinning the Greenback. The GBP/USD is trading at 1.2458 after hitting a daily high of 1.2514, as sellers set their sights on technical support to prolong their profits.

Last week, Governor Andrew Bailey said The Bank of England is "much nearer" to ending its run of interest rate increases but borrowing costs might still have further to rise because of stubborn inflation pressures. The BoE has raised rates at its last 14 meetings as it grappled with the highest inflation among the world's big, rich economies. It is expected to raise borrowing costs again later this month, taking the bank rate to 5.5%.

In recent weeks, senior officials at the BoE have stressed that even if rates are close to peaking, they are unlikely to fall quickly, as the central bank seeks to ensure inflationary pressures are squeezed out of the economy.

Expected Ranges

  • NZD/USD: 0.5770 - 0.5970 ▼
  • NZD/EUR: 0.5375 - 0.5575 ▲
  • GBP/NZD: 2.0967 - 2.1167 ▼
  • NZD/AUD: 1.0700 - 1.0900 ▼
  • NZD/CAD: 0.7900 - 0.8100 ▼