Home Daily Commentaries New Zealand dollar trades back below 59 US cents

New Zealand dollar trades back below 59 US cents

Monday 7 November, 2022

Daily Currency Update

The New Zealand dollar is slightly stronger this morning when valued against the greenback. The Kiwi dollar was almost up 3% higher on Friday. It was the biggest daily percentage increase in the NZD since June 2010. The NZD ended the week at around US$0.5930, its highest closing level in more than six weeks. The Kiwi dollar was the top-performing currency last week, helped by the tailwind of a stronger CNY (which was 0.9% stronger). The Kiwi outperformed the Aussie dollar on the week, with the Reserve Bank of Australia RBA’s cautious approach to tightening policy (another 25bps rate hike last week) contrasting with a very strong NZ employment report, which solidified expectations for a 75bps Reserve bank of New Zealand hike later this month. Looking ahead this week in New Zealand and on Tuesday the Reserve Bank of New Zealand (RBNZ) will release quarterly Inflation Expectations. A Survey of about 100 consumers asks respondents where they expect prices to be 24 months in the future. While measuring expectations of future inflation can manifest into real inflation, primarily because workers tend to push for higher wages when they believe prices will rise. On Friday we will see the release of the BusinessNZ Manufacturing Index. A survey of manufacturers asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories. Also on Friday Statistics New Zealand will release the Food Price Index (FPI) which measures the change in the price of food and food services purchased by households.

Key Movers

On Friday US employment figures have shown mixed readings in October, which has increased the weakness of an already vulnerable US dollar as risk appetite returned to the markets. Non-Far private employment increased by 261K in October, beating expectations of 200K, while September’s figures were revised to 315K, up from the previously estimated 264K. Investors’ enthusiasm about the strong employment data has been offset by the higher-than-expected unemployment rate, which rose to 3.7% from 3.5% in September, beating the consensus of a 3,6% reading, and the slowdown on hourly wages, 4,7% in October from 5% in September. US equity markets were higher on Friday, helped by the optimism around China and the pullback in Fed rate expectations. The S&P500 and NASDAQ were both 1.4% higher, while the EuroStoxx 600 was up almost 2%. The pound has continued appreciating during Friday’s US afternoon trading, buoyed by the broad-based USD weakness, to reach session highs at USD$1.1380. The GBP was by far the weakest currency on the week, down over 2%, reflecting the Bank of England’s dovish messaging at its monetary policy meeting, with Governor Bailey saying the Bank thought the market was overpricing the likely extent of tightening. The GBP/USD pair has shrugged off the previous day’s negative pressure on Friday, to perform a shocking 1.9% daily rally after bouncing from the lower range of the USD$1.1100s to close the week a few pips shy of USD$1.1400.

Expected Ranges

  • NZD/USD: 0.5750 - 0.5950 ▲
  • NZD/EUR: 0.5800 - 0.6000 ▲
  • GBP/NZD: 1.9100 - 1.9300 ▲
  • NZD/AUD: 1.0800 - 1.1000 ▼
  • NZD/CAD: 0.7800 - 0.8000 ▼