NZD marks 14-month lows as risk aversion intensifies
Tuesday 25 January, 2022
Daily Currency UpdateThe New Zealand dollar tumbled through support overnight, marking fresh 14 months lows amid a sustained risk off move. Fears Russia and the Ukraine will soon be at war have intensified over night as intelligence suggest Putin is preparing a “lightning” strike designed to take out the capital Kiev. The threat of war coupled with concerns the omicron variant will delay the global economic recovery and tighter monetary policy only further stifle economic activity as central banks try to control runaway inflation have pushed investors toward haven assets, driving the NZD below 0.6730 and 0.67 toward lows at 0.6660. The currency has found some support in the latter hours of the overnight session climbing back toward 0.67 yet remains under intensified pressure as markets remains steadfast in their risk aversion.
Our attentions remain with the broader risk narrative ahead of tomorrow domestic CPI inflation print. Having broken supports at 0.67 a consolidation below this handle could drive an extension toward 0.66.
Note: There will be no commentary tomorrow with Australian markets closed for Australia Day.
Key MoversSafe haven currencies outperformed Monday as investors sought to dump risk assets. The USD outpaced major rivals with the DXY dollar index up almost half a percent, testing a break above 96. The threat of war and the promise of tighter monetary policy have driven a sharp selloff in risk assets through the last week with major indices suffering the largest weekly drop since the Pandemic began in March 2020. With Emerging Market currencies bearing the brunt of the correction, the sell off has spilled into developed markets as risk and commodity sensitive major currencies have come under intensified selling pressure. The AUD lead losses while the NZD, CAD and NOK all tumbled. The Pound has fallen below 1.35, yet found support on moves approaching 1.3450 while the Euro proved surprisingly resilient stubbornly staving off a push below 1.13, recovering into today's open. Unsurprisingly in this risk off environment the Yen has outperformed with the AUD testing a break below 81 and the NZD giving up 76.
Our attentions remain with the broader risk narrative while German IFO business confidence and US consumer confidence headline the macroeconomic ticket.
- NZD/USD: 0.6600 - 0.6790 ▼
- NZD/EUR: 0.5850 - 0.5970 ▼
- GBP/NZD: 1.9980 - 2.0250 ▲
- NZD/AUD: 0.9350 - 0.9450 ▲
- NZD/CAD: 0.8430 - 0.8490 ▲