NZD steady in face of broader US dollar uptick
Wednesday 13 October, 2021
Daily Currency Update
NZD - New Zealand Dollar
The New Zealand dollar is little changed this morning, opening near 0.6935 having tracked largely sideways through trade on Tuesday. The NZD enjoyed a brief foray above 0.6950 touching intraday highs at 0.6970 as commodity currencies found support amid surging coal prices and a consolidation of recent gains across WTI and Brent Crude. The NZD was however unable to hold on, giving up gains overnight, drifting back toward 0.6925/35 on the heels of a broadly stronger US dollar. Expectations for an adjustment in Fed monetary policy are firming, with most participants expecting officials will announce a tapering of bond purchases next month. Dollar strength continues to prevent sustained NZD upside and our attentions today turn to US CPI data, along with commentary from Key Bank of England policymakers and domestic business performance. With inflationary concerns rising globally, we are keenly attuned to domestic business price intentions. A fall would validate last week's unusual dip in the QSBO report and perhaps eases pressure on the RBNZ to ramp up the pace of future rate hikes.
Key MoversThe USD remains well bid, extending gains against key pairs, driving the dollar index toward 13-month highs. The euro fell to a 15-month low overnight, testing supports at 1.1525 as concern surrounding rapidly rising inflationary pressures and the ongoing energy saga continue to envelop the single currency. Compounding losses is rising expectations the ECB will significantly lag the Fed and other major central banks in normalising monetary policy. Commentary from key Fed policymakers through trade on Tuesday suggest an announcement around a program of tapering QE will be announced in November, despite a softening in labour market data. The further divergence in monetary policy expectations has seen a widening in bond yields, driving further demand for the USD and a move away from the euro.
The Japanese yen extended the week's early losses as the USD pushed through 113.50 to mark 113.65 a multi-year-high. The spectre of low inflation and long run accommodative monetary policy has forced investors to give up the JPY in search of a higher yield return.
The GBP is largely unchanged despite ongoing debate between the UK and EU regarding border protocol in Northern Ireland. Markets took little notice of reports that tariff’s may be introduced if the UK does not change tact, yet it is something we are monitoring closely. The UK economy can hardly afford the imposition of import tariffs as it grapples with an ongoing energy crisis, inflationary pressures, and the broader Pandemic recovery.
- NZD/USD: 0.6880 - 0.7020 ▲
- NZD/EUR: 0.5980 - 0.6050 ▲
- GBP/NZD: 1.9480 - 1.9650 ▼
- NZD/AUD: 0.9380 - 0.9460 ▼
- NZD/CAD: 0.8590 - 0.8690 ▼