Home Daily Commentaries NZD tests new highs as optimism around China-led global recovery grows

NZD tests new highs as optimism around China-led global recovery grows

Daily Currency Update

The New Zealand dollar enjoyed modest gains through trade on Monday as ongoing optimism surrounding the reopening of the Chinese economy continues to bolster hopes for stronger than anticipated global growth. The NZD surged through US$0.64 to mark fresh highs at US$0.6430 before profit taking and overnight selling pressure saw it relinquish gains and trade back below US$0.64 to sit near US$0.6385 at the time of writing.

Recent NZD strength reflects USD weakness and a strong surge in risk demand following China’s pivot away from its Covid zero policy. That said, a rapid rise in covid case numbers and opaque reporting out of China has cast a pall over the recent upside. Concerns surrounding China’s ability to manage the exit wave without hiccups will likely weigh on investors until a clearer and defined data picture is available.

Our attention turns now to Chinese GDP data as a key marker and baseline from which any Chinese economic rebound post-Covid will be measured.

Key Movers

Currency moves to start the week were relatively small as the AUD and JPY continued outperforming and maintaining 2023 trend lines. With US markets closed in observance of Martin Luther King Jnr Day liquidity lines and volumes remained thin through the overnight session. Early USD losses were unwound and we sit in much the same position this morning as we did on open Monday.

With little to note to drive discussion on Monday, our attention remains on broader 2023 themes. Increasing confidence US inflation has peaked has driven a correction in US rate expectations as markets prepare for a halt to US rate hikes come May. The correction across US and global rates have dampened demand for the USD, while a warmer winter across Europe has helped further ease energy prices. China’s move to exit its Covid zero policy has helped boost hopes for stronger than anticipated global growth.

With USD fortunes faltering our focus shifts to other key majors for upside opportunities. While the JPY suffered heavy losses through 2022, a correction in the global rate backdrop, a pivot in BoJ policy and expectations that yield curve controls will soon be abandoned have helped fuel a JPY resurgence. We are keenly attuned to tomorrow's BoJ outlook, Monetary policy statement and press conference for further guidance on near-term Bank of Japan monetary policy.

Expected Ranges

  • NZD/USD: 0.6350 - 0.6430 ▲
  • NZD/EUR: 0.5850 - 0.5950 ▲
  • GBP/NZD: 1.8980 - 1.9220 ▼
  • NZD/AUD: 0.9080 - 0.9220 ▲
  • NZD/CAD: 0.8520 - 0.8580 ▲