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Kiwi driven higher as emboldened investors drive risk demand

NZD - New Zealand Dollar

The New Zealand dollar rallied through trade on Tuesday, buoyed by a bounce in risk demand. Emboldened by the unprecedented policy mandates issued by the Federal reserve and the promise of a record US stimulus bill investors drove a recovery across equities and away from haven assets, pushing the NZD back through 0.58 to intraday highs at 0.5840.

With a semblance of normality returning to trading patterns through the week thus far, investors appear to be responding to the coordinated global monetary policy correction and record domestic fiscal response, opening the door for ongoing NZD upside should conditions surrounding the virus improve. Encouragingly the drastic lockdown measures across Europe appear to be working as the pace of spread slowed through Monday and Tuesday and attentions now turn to the US as the next epicenter of the crisis. The WHO has criticized US officials for being to slow in enacting containment measures as the virus spreads through New York City at an alarmingly rapid pace with more cases per million citizens than Hubei Province.

Risk sentiment continues to drive demand and our attentions remain squarely affixed on US congress and affirmation it has passed a 2 trillion-dollar stimulus bill.

Key Movers

The US dollar fell against the majority of major counterparties through trade on Tuesday as investors responded to the unprecedented stimulus measures enacted by the Federal reserve on Monday. Emboldened markets drove equities higher and began unwinding last week’s panic led liquidity push forcing the worlds base currency index lower for the first time in the last 11 days. With the pace of spread across Europe slowing this week the US, in particular New York city, has emerged as the new epicentre in the ongoing battle against COVID19. The US has been criticized as being to slow to react to the threat of the coronavirus and modelling suggest the health impact within the States could outstrip hotspots in Italy, Spain and even China.

The Great British Pound was the days big mover, bouncing back against the USD and testing moves through 1.18. Having touched 35 year lows last week, sterling found support in renewed demand for risk and a broader softening in the USD. The GBP remains vulnerable to broader risk sentiment swings with is ballooning current account deficit making it particularly vulnerable to risk off moves.

Attentions remains squarely affixed to the COVID19 pandemic and while we anticipate most currency will recoup much of the losses suffered against the USD in time, the world’s base currency will continue to find support as long as the pandemic continues and the pace of spread across the globe remains largely unchecked.

Expected Ranges

NZD/USD: 0.5480 - 0.5930 ▲

NZD/EUR: 0.5240 - 0.5520 ▲

GBP/NZD: 1.9950 - 2.0780 ▲

NZD/AUD: 0.9730 - 0.9920 ▲

NZD/CAD: 0.8110 - 0.8580 ▲