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NZD edges higher but lags broader commodity led gains

Wednesday 8 December, 2021

Daily Currency Update

The New Zealand dollar advanced through trade on Tuesday but lagged its major commodity counterparts in capitalising on renewed demand for risk. Having slipped below 0.6750 and touched intraday lows at 0.6735 the NZD rebounded through the back half of the domestic session and overnight extending toward intraday highs at 0.6785. Market concerns surrounding the Omicron variant have faded this week as anecdotal evidence appears to suggest this new mutation, while more contagious, will not result in severe health implications for those vaccinated. As the threat to the global economic recovery eases, investors sought risk assets, prompting strong gains across equities and commodities. We anticipate the NZD will continue to edge higher as long as the positive risk narrative remains intact. The currency remains vulnerable to further depreciation should we see another risk off push. With supports currently in play at 0.67 a break toward 0.65 is achievable if scientific data undermines anecdotal evidence, and we are engulfed in a new wave of COVID-19 infections.

Key Movers

Commodity currencies carried the day as haven currencies faltered amid a broader extension in risk demand. The AUD and CAD lead major currencies on Tuesday, topping the leaderboard as the JPY, EUR, GBP and CHF all moved lower. Having forced the USD back below 113 last week, the JPY gave up gains as the dollar extended toward intraday highs at 113.75 while the GBP gave up 1.33 and 1.3250, eyeing a break below 1.32 as the EUR fell through 1.1250 to mark intraday lows at 1.1230. Volatility remains elevated, and we anticipate further price action through the coming weeks. With little of note on today’s macroeconomic ticket, our attentions turn to the Bank of Canada and its latest policy update. We expect a more hawkish tone given recent labour market strength and inflationary pressures, with investors pricing in rate hikes beginning March next year.

Expected Ranges

  • NZD/USD: 0.6700 - 0.6830 ▲
  • NZD/EUR: 0.5950 - 0.6070 ▲
  • GBP/NZD: 1.9420 - 1.9680 ▼
  • NZD/AUD: 0.9490 - 0.9580 ▼
  • NZD/CAD: 0.8520 - 0.8630 ▼