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Kiwi steady ahead of this week’s RBNZ monetary policy meeting

Monday 21 February, 2022

Daily Currency Update

The New Zealand dollar finished the week below 67 US cents, after reaching a weekly high on Friday of 0.6730. Opening at 0.6684, Local PPI figures were released in the morning but did little to move the local currency. Risk sentiment improved throughout the domestic session as favourable developments in Ukraine saw traditional safe haven-assets such as the Japanese Yen sold off. NZD/JPY reached levels of 77.58 as news filtered through that talks between U.S. Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov will take place in Europe late next week. With geopolitical events dictating movements on foreign exchange markets, NZD/USD pulled off weekly highs during the North American session as Wall Street ended lower. Investors sold off equities in droves, not wanting to hold risky assets over the long weekend in case tensions escalated in Ukraine. Nasdaq finished 1.23% lower and the New Zealand dollar finished slightly higher at 0.6695. The New Zealand dollar opens this morning at 0.6690. This week’s most notable news for the Kiwi sees the latest RBNZ interest rate decision due for release on Wednesday where markets have fully priced in a further 25 basis point hike to 1.0%. We expect support levels to hold onto moves approaching 0.6660 while any upward push will likely meet resistance at 0.6730.

Key Movers

All eyes were fixated on President Biden this week as it is his “sense” that Russia will invade Ukraine within the next several days, heightening potential volatility and risk sentiment in global markets this week. The Dow shed 0.68% and safe-haven assets were driven higher into the long weekend in the United States. The US Dollar Index (DXY) which measures a basket of currencies against the world's most traded currency ended the day 0.32% higher at 96.10 and the USD/JPY flat at 115.00. Several conflicting statements by Federal Reserve members since Friday have markets confused as to the next moves by the FOMC in March. New York Federal Reserve Bank President John Williams stated “I don’t see any compelling argument to taking a big step at the beginning” despite 40 year high inflation levels. Whereas St. Louis Federal Reserve Bank President James Bullard stated a good target would be to have the funds rate up by 100 basis points by July 1 as they are missing their inflation objectives by 300 basis points. The CME Fedwatch tool is currently pricing a 50-point basis hike at 36%, up from 6% on January 19th. Elsewhere the Euro was 0.34% lower finishing the week at 1.1319, weighed down by geopolitical tensions, along with the Great British Pound also dropping by 0.26% to 1.3580. This week looks to be dominated by news out of Ukraine while the United States is closed for business on Monday in observance of President's day.

Expected Ranges

  • NZD/USD: 0.6660 - 0.6730 ▲
  • NZD/EUR: 0.5870 - 0.5930 ▲
  • GBP/NZD: 2.0100 - 2.0360 ▼
  • NZD/AUD: 0.9260 - 0.9340 ▲
  • NZD/CAD: 0.8480 - 0.8580 ▲