Daily Currency Update

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Kiwi enjoys short term uptick but can it hold onto gains?

NZD - New Zealand Dollar

The New Zealand dollar edged upward through trade on Friday, buoyed by a broad-based US dollar sell off. Shrugging aside a push to haven assets the NZD jumped through 0.6350, touching intraday highs at 0.6364 and marking a 5th consecutive daily appreciation. As volatility across currency markets gathers momentum normal market conventions have shifted. Typically the NZD’s positive association with risk appetite would have fostered a deeper downward shift through the last week, however the wider correction in US interest rate and forward differentials and the sharp USD sell-off have prompted short term NZD upside. While the USD remains under pressure we expect the NZD will correct lower in the weeks ahead as the likelihood of a global recession increases and normal trading patterns resume.

Opening marginally lower this morning we are watching resistance on moves approaching 0.6350-70 and support on dips below 0.6250 and 0.6200.

Key Movers

Global appetite for risk plunged on Friday as fears the global economy will spiral into recession grow by the day. The spreading coronavirus is driving an urgent flight to haven assets as volatility across financial markets reached levels not seen since the GFC in 2008. With bond yields tumbling, Gold rallied and the JPY and CHF jumped higher while the US dollar fell against most major counterparts. The number of cases reported in the US rose steadily throughout last week prompting markets to price in further Federal Reserve rate cuts. Markets largely ignored a robust labour market print, instead zeroing in on the fiscal response to the coronavirus thus far. Economic advisor Kudlow has promised a “timely and measured” platform of support, a message that disappointed markets chasing more affirmative action. The USD fell through 105 JPY while the Euro drove through 1.13. Volatility in EUR/USD touched 15-month highs having risen sharply through the last 3 weeks, bolstering Euro demand as investors unwind a string of short positions entered through the first 2 months of the year.

The Canadian dollar was the day’s worst performer among majors, tumbling as oil prices bottomed out. Oil dropped 9% to three year lows as talks between OPEC and non-OPEC oil producers broke down before an agreement to cut production could be found.

Attentions remain squarely affixed to developments surrounding the coronavirus as fear and appetite for risk drive direction.

Expected Ranges

NZD/USD: 0.6220 - 0.6370 ▲

NZD/EUR: 0.5530 - 0.5670 ▼

GBP/NZD: 2.0260 - 2.0880 ▲

NZD/AUD: 0.9505 - 0.9630 ▲

NZD/CAD: 0.8440 - 0.8650 ▲