Daily Currency Update

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NZD falters as bond market uncertainty prompt push toward USD

NZD - New Zealand Dollar

The New Zealand dollar shifted lower into this morning’s open. Slipping back below 0.74 US cents amid equity market volatility and bond price uncertainty. The NZD enjoyed sustained support through the domestic session tracking toward intraday highs at 0.7460, before investors quickly reversed the recent uptick in a push for USD following a rout across bond markets, as US treasuries continued their rapid appreciation. The NZD fell to intraday lows at 0.7360, before downward momentum was arrested yet remains vulnerable to a further correction given the weeks rapid appreciation.

With little of note on today’s domestic ticket our attentions remain with the reflation narrative and recent bond price action and treasury yields. Sustained volatility across bonds and an ongoing rapid appreciation in treasury yields could elevate expectations for a steep correction across risk assets. A shift in risk demand remains a key risk to sustained NZD upside through the short term.

Key Movers

The Dollar Index touched a 7 week low through the front end of yesterday’s session, depressed by sustained gains across commodity prices and currencies, particularly the AUD and CAD. However volatility across bond markets and a surge in US treasury yields allowed the world’s base currency to rebound through the back end of the day, recouping early losses and enjoying gains against nearly all major counterparts. The euro pushed through 1.22 touching highs at 1.2240, before being forced back below 1.2170, while the GBP fell short of a break above 1.42 topping out at 1.4175, before testing a break back below 1.40.

Our attentions today remain with price action across bond markets and treasury yields as key risk drivers into the weekly close. Heightened fears the recent appreciation has been over done could prompt a correction across asset classes including currencies.

Expected Ranges

NZD/USD: 0.7290 - 0.7460 ▼

NZD/EUR: 0.5950 - 0.6120 ▲

GBP/NZD: 1.8880 - 1.9120 ▲

NZD/AUD: 0.9305 - 0.9360 ▲

NZD/CAD: 0.9220 - 0.9330 ▼