Home Daily Commentaries NZD continues its downward spiral despite RBNZ rate hike

NZD continues its downward spiral despite RBNZ rate hike

Daily Currency Update

NZD - New Zealand Dollar

The New Zealand dollar depreciation continued through trade on Wednesday, falling below 0.69 US cents amid stronger than anticipated US data releases, more hawkish commentary from Fed officials and an RBNZ policy update that offered few surprises. Despite the backdrop of rising inflationary pressures, the MPS opted to raise rates by just 25 basis points, preferring a longer and measured period of rate adjustments over the coming 12-18 months. Concerns surrounding the spread of COVID-19 across the country and a slowdown in economic activity through the second half of the year, weighed on policy makers and forced a downward correction across the short end of the yield curve. Having slipped below 0.69 US cents, the NZD touched intraday lows at 0.6860, with 0.6805 (year to date lows) now a critical marker and technical support handle.

Key Movers

The US dollar extended gains through trade on Wednesday amid a string of stronger macroeconomic data sets and hawkish fed commentary. Jobless claims fell to their lowest level since 1969, while personal income and spending data in October rose faster than expected following an uptick in wage growth. Consumer sentiment did fall to a decade low, yet investors largely ignored this data point given the survey has absorbed a broader political bias in recent years. Core Durable goods orders rose, while headline orders proved resilient, weighed down only by a fall in demand for new aircraft. The strong rebound in business investment and a depreciation in the trade deficit combined to help drive expectations the US economy is now well on track to a full recovery. Key dollar indices rose a further 0.4%, with added support coming following commentary from San Francisco Fed president Daly. Daly joined other key policy makers in suggesting a faster pace of QE adjustment could be warranted. With the Fed continuing to point to CPI data and jobs performance as key markers for direction, we are keenly attuned to November non-farm Payrolls and CPI data sets ahead of the December 16 policy meeting. The euro has fallen below 1.12, while sterling appears poised to break 1.33 and the yen continues to give up ground with the USD consolidating a move above 115, touching highs at 115.15.

Expected Ranges

  • NZD/USD: 0.6805 - 0.6920 ▼
  • NZD/EUR: 0.6080 - 0.6190 ▲
  • GBP/NZD: 1.9120 - 1.9480 ▲
  • NZD/AUD: 0.9490 - 0.9630 ▲
  • NZD/CAD: 0.8680 - 0.8820 ▼