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Coronavirus drives flight to safety

NZD - New Zealand Dollar

The New Zealand dollar dipped through trade on Monday, down 1% and marking another day of underperformance as fears the Coronavirus will continue to spread hampered demand for commodity currencies and traditional risk driven assets. Having consolidated moves below 0.66 the Kiwi fell below 0.6550 to touch 0.6545.

With little of note on the domestic macroeconomic calendar and liquidity levels expected to remain muted during the Chinese New Year period we anticipate risk demand will drive direction. Headline news and updates as to the progress of the Coronavirus will continue to dominate market direction.

Key Movers

The US dollar, Japanese Yen and Swiss Franc all rose through trade on Monday as mounting fears the coronavirus will morph into a global health emergency spooked markets and pushed investors toward safe haven assets. Concerns health authorities have not reacted fast enough to contain the spread of the deadly respiratory virus have forced markets to the sidelines and seen the Chinese yuan come under heightened selling pressure. The CNY fell to its lowest level this year and its weakest level since December 30 touching 6.99 having lost almost 1%. Until we see a shift in headlines and some optimism surrounding a cure we expect risk appetite to remain muted and safe haven assets will continue to benefit.

The Great British pound shifted lower through trade on Monday as investors position themselves ahead of this week’s Bank of England’s policy meeting. A largely positive Services and Manufacturers PMI print on Friday helped quell calls for a rate cut. Having touched fortnight highs at 1.3180 sterling shifted to 1.3056 as investors prepare for Wednesday’s policy decision with just over 50% of analysts pricing in a rate cut.

Expected Ranges

NZD/USD: 0.6520 - 0.6610 ▼

NZD/EUR: 0.5910 - 0.5980 ▼

GBP/NZD: 1.9750 - 2.0050 ▲

NZD/AUD: 0.9650 - 0.9730 ▲

NZD/CAD: 0.8580 - 0.8680 ▼