Home Daily Commentaries New Zealand dollar opens slightly weaker against the greenback

New Zealand dollar opens slightly weaker against the greenback

Daily Currency Update

New Zealand dollars were headed for their fifth week of losses on Friday as the spread of the Omicron variant clouded the outlook for global growth just as markets were pricing in a faster pace of US rate hikes. The Kiwi dollar opened slightly weaker against the greenback down about 0.5% for the week at 0.6796, but again above the low of 0.6773. It has little in the way of support until $0.6700. The emergence of the Omicron variant though is a significant risk to the rebound, and it is too early to assess how severe the variant is.

Looking ahead this week and volatility is likely to stay elevated. On Monday we will see the release of monthly ANZ Commodity Prices which measures the average price of the nation's main commodity exports are sampled on the global market. On Thursday we will see the release of quarterly Manufacturing Sales. From a technical perspective, the NZD/USD pair is currently trading at 0.6738. We continue to expect support to hold on moves approaching 0.6726 while now any upward push will likely meet resistance around 0.0.6771.

Key Movers

Global markets mood soured last week. Risk aversion meant that traders flocked into the safety of the US dollar. The US Dollar Index hit its highest level since July 2020 last week with the US Federal Reserve signalling a faster pace of tapering (QE wind-down process). The bond market has moved some way to price in a greater risk of early hikes with three-year yields having climbed to 0.94% from 0.25% at the end of September. Longer-term bonds have had a more bullish run in line with a rally in Treasuries, taking 10-year yields down almost 15 basis points this week to 1.644%.

Looking ahead this week, all eyes will be on the US Consumer Price Index (CPI) report on December 10th. Headline inflation is expected at 6.8% y/y in November, up from 6.2% in October. That would be the highest rate in almost 40 years. The core reading, which excludes energy and food items, is estimated at 4.9% y/y from 4.6% prior. Further upside surprise could increase hawkish Fed policy bets for 2022, risking volatility in markets.

Expected Ranges

  • NZD/USD: 0.6650 - 0.6850 ▼
  • NZD/EUR: 0.5850 - 0.6050 ▼
  • GBP/NZD: 1.9450 - 1.9650 ▲
  • AUD/NZD: 1.0230 - 1.0430 ▲
  • NZD/CAD: 0.8550 - 0.8750 ▼