Home Daily Commentaries NZD extends gain on back of Bank of Japan intervention

NZD extends gain on back of Bank of Japan intervention

Matt Richardson
Written by
Matt Richardson

Matt Richardson

OFXpert

Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange.

| Friday 3 May, 2024

Daily Currency Update

The New Zealand dollar is stronger this morning having edged back above US$0.5950 amid a weaker USD and stronger Japanese yen. Markets extended the post FOMC trend. With US treasury yields moving down and risk assets edging higher the USD fell, allowing the NZD to consolidate a break above US$0.59. The NZD extended gains toward US$0.5960 following more official intervention in Japan. The Ministry of Finance directed the Bank of Japan to defend the beleaguered yen, pushing the USD lower and spilling over to drive gains across other Asian currencies. With speculators forced to the sidelines, support for the yen has driven support for the Chinese yuan and run into support for the NZD. If the signals sent this week by the Bank of Japan and MoF suggest we have seen a low for the yen, we have removed a headwind for the NZD moving forward and could see an extended break higher if resistance at 0.5980/0.60 is breached. Having edged above 95 against the yen on Monday, the NZD is now trading back below 91.50. While we continue to monitor JPY performance and interventionist moves, our attentions today turn to US non-farm payrolls data for direction into the weekly close.

Key Movers

After the flurry of activity that followed the Fed policy meeting on Wednesday, price action through trade on Thursday settled into a more measured pattern, though continued to trend in the same direction. The USD is weaker, while the euro and GBP were flat overnight. The big mover again was the Japanese yen. With US treasury yields trending lower, the yen found support, while another round of intervention forced the USD toward 153. Japan’s Ministry of Finance directed the Bank of Japan to intervene and support the beleaguered yen, extending yesterday’s move and the correction off 160. Increased volatility in yen will make it more and more difficult for speculators to hold positions, forcing analysts to sideline major bets and driving more near-term volatility as existing positions are unwound. With treasury yields lower equities and risk assets edged higher on the day and our attentions turn now to US employment data. We expect non-farm payroll to show a moderate increase in April, ensuring the unemployment rate remains steady at 3.8%, while wage inflation will be keenly monitored as a critical marker for future inflation trends.

Expected Ranges

  • NZD/USD: 0.5880 - 0.6020 ▲
  • NZD/EUR: 0.5500 - 0.5600 ▲
  • GBP/NZD: 2.0900 - 2.1200 ▼
  • NZD/AUD: 0.9020 - 0.9120 ▼
  • NZD/CAD: 0.8100 - 0.8200 ▲

Written by

Matt Richardson

OFXpert

As a Senior Corporate Client Manager, Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange. Matt has clients who he has been working with for over a decade, a testament to his knowledge and dedication in the field. Matt is also a regular contributor on Ausbiz, offering clear and precise updates on currency market trends, showcasing his ability to interpret complex financial data into actionable insights.

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