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Kiwi hits year to date low as resurgent Greenback takes center stage

NZD - New Zealand Dollar

The New Zealand Dollar hit a fresh year to date low overnight despite the positive trading tone in the broader global financial markets. Opening this morning at 0.6385, the Kiwi fell a marginal 0.2% as the US Dollar strengthened in the absence of any local data.

With very little on the economic calendar to drive direction locally, the Kiwi took its cues from off-shore headlines with the COVID-19 virus continuing to take center stage. While there are some signs that the virus is being contained (the number of new cases are on the decline) there are troubling downside risks to the economic outlook that continue to dominate. While China has committed to a variety of support for the economy, the IMF has left in place the moderate forecast for global growth. Adding fuel to the fire however is the risk of recession in Japan which just report a larger-than-expected contraction in GDP. As most of New Zealand’s largest trading partners struggle with COVID-19 and it’s implications, the flightless bird remains under pressure.

Moving into Thursday, the Kiwi turns to Australian unemployment for direction while keeping a close eye on developments in Asia.

Key Movers

The US Dollar Index (DXY) which measures a basket of major currencies against the greenback continued its rampant moves overnight hitting three-year highs. Improved risk appetite in markets and strong domestic data out of the United States saw movements out of traditional safe haven currencies such as the Japanese Yen, falling to nine-month lows and a 1.35% drop on the day’s trade.

The Federal Reserve released their monthly meeting minutes a couple of hours ago and noted that the current stance of monetary policy is appropriate. Holding rates between a range of 1.5% and 1.75% will give Chairman Jerome Powell time to analyse the current impact of the coronavirus for the local economy.

Core United States Producer Price Index for the year rose to 1.7% from 1.1% and rose 0.5% on a monthly basis, continuing the recent theme of positive economic data for the start of 2020.

The same could not be said for the EUR as it lost further ground, hitting lows yesterday of 1.0782 following a sharp decline in economic sentiment in Germany. A number of data releases will dictate any further decline for the common currency as ECB Monetary Policy Meeting accounts are due for release this evening.

Expected Ranges

NZD/USD: 0.6350 - 0.6410 ▼

NZD/AUD: 0.9530 - 0.9600 ▲

GBP/NZD: 2.0000 - 2.0420 ▼

NZD/EUR: 0.5880 - 0.5930 ▼

NZD/CAD: 0.8400 - 0.8480 ▼