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New Zealand dollar rallies global on risk sentiment

Monday 16 May, 2022

Daily Currency Update

The New Zealand dollar closed the week stronger against the greenback which saw a recovery on Friday of 0.9%.  NZD/USD pair declined 2.51% last week which saw the Kiwi dollar trading at July 2020 lows. The Kiwi plunged 1% on Thursday but has steadied on Friday and is trading at 0.6244. Risk assets ended last week on a positive note, with equities rebounding strongly on Friday from their heavy falls earlier in the week.  Helping the turnaround in risk sentiment, the mayor of Shanghai said the city was aiming to start an “orderly opening-up” by May 20th, finally providing some light at the end of the tunnel.  The first stage of this process has been unveiled over the weekend, with supermarkets, department stores, hairdressers, and pharmacies, to be gradually reopened from today.  Whether Shanghai can remain lockdown-free (and whether Beijing can avoid it) is another matter. On Friday New Zealand’s Manufacturing Index slowed to 51.2 in April, down from 53.8 in March. The reading didn’t have much impact on the New Zealand dollar, which remains under pressure after a sharp drop on Thursday. This marked the lowest level since August 2021, and the index has fallen close to the 50.0 level, which separates contraction from expansion. Manufacturers continue to point to labour shortages and supply chain disruptions as key problems for the sector, along with Covid-19. Looking ahead this week and on Monday we will see the release of the Business NZ Services Index a survey of purchasing managers which asks respondents to rate the relative level of business conditions.  On Thursday we will see the release of the Annual Budget Release which outlines the government's budget for the year, including expected spending and income levels, borrowing levels, financial objectives, and planned investments.

Key Movers

Key Mover on Friday Wall Street closed out another volatile week of trading with a broad rally though it wasn’t enough to keep the market from its sixth straight weekly drop, the longest such streak since 2011. The S&P 500 climbed 2.4 per cent. More than 90 per cent of the companies in the benchmark index closed higher. The Nasdaq rose 3.8 per cent as more gains in technology companies helped lift the tech-heavy index. The Dow Jones Industrial Average rose 1.5 per cent. Bond yields rose significantly. The yield on the 10-year Treasury rose to 2.93 per cent from 2.82 per cent late Thursday. The price of US crude oil rose 4.1 per cent to settle at $US110.49 per barrel which is now up about 50 per cent for the year.

Expected Ranges

  • NZD/USD: 0.6150 - 0.6350 ▲
  • NZD/EUR: 0.5920 - 0.6120 ▲
  • GBP/NZD: 1.9350 - 1.9550 ▼
  • NZD/AUD: 1.0900 - 1.1100 ▼
  • NZD/CAD: 0.8000 - 0.8200 ▲