Home Daily Commentaries New Zealand dollar trades below 64 US cents

New Zealand dollar trades below 64 US cents

Monday 5 December, 2022

Daily Currency Update

The New Zealand dollar is stronger this morning when valued against the Greenback. The Kiwi dollar was the standout performer on Friday, continuing its recent stellar run. The kiwi dollar was up 0.6%, pushing above the 0.64 mark for the first time since August, taking its gain on the week to a chunky 2.6%. The NZD/AUD cross closed the week above 0.94 for the first time since January, consistent with market expectations for the RBA to stop hiking at a much lower terminal rate than the Reserve Bank of New Zealand (RBNZ). On Friday RBNZ Governor Adrian Orr joined a panel discussion titled "A Digitalised Monetary System in the Making?" at the Bank of Thailand 80th Anniversary Conference, in Bangkok. RBNZ Governor Adrian Orr admitted the RBNZ was purposely engineering a recession to slow spending and bring inflation under control. To counter inflation the Reserve Bank (RBNZ) hiked the Official Cash Rate (OCR) by 75 basis points last week - the largest-ever rise - to increase interest rates and hopefully curb inflation. Annual inflation has skyrocketed over the past year from 4.9 percent in the September 2021 quarter compared to a whopping 7.2 percent in the same quarter this year. It comes after years of low inflation.

Key Movers

On Friday US stocks are trading with losses after November’s US Nonfarm Payrolls (NFP) report. Data showed that the economy added 263,000 new jobs, and October’s was upward revised 284,000 jobs, the Department of Labor (DoL) report showed. In the same statement, the Unemployment Rate was unchanged at 2.7%, while Average Hourly Earnings rose by 5.1% YoY, vs. 4.6% consensus, reigniting wage inflation spirals, adding further pressure on the Fed. Canada’s employment report on Friday was also stronger on balance, with 10k job growth matching consensus expectations but the unemployment rate unexpectedly falling to 5.1%, near its lowest levels since the 1970s. Strong job growth for core-aged women helped push the national unemployment rate even lower to 5.1 per cent in November, according to Statistics Canada. Women aged 25 to 54 set a new employment rate record in November at 81.6 per cent after adding 25,000 jobs last month, the federal agency said. That’s the highest that figure has stood since data tracking started in 1976 and trumps the previous record of 81.4 per cent set in May 2022. Canada’s labour market has remained remarkably strong despite signs of an economic slowdown. In November, wages were up 5.6 per cent compared to a year ago, marking the sixth consecutive month of above 5.0 per cent growth. The market still favours the Bank of Canada to hike by 25bps next week, with a 50bps move seen as an outside chance (~25% priced in).

Expected Ranges

  • NZD/USD: 0.6250 - 0.6450 ▲
  • NZD/EUR: 0.5950 - 0.6150 ▼
  • GBP/NZD: 1.9100 - 1.9300 ▲
  • NZD/AUD: 1.0500 - 1.0700 ▲
  • NZD/CAD: 0.8450 - 0.8650 ▲