Daily Currency Update

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Kiwi upside continues, but are we nearing the top

NZD - New Zealand Dollar

The New Zealand dollar enjoyed strong gains throughout the Easter break, buoyed by broader USD softness following extensions in the Federal Reserve’s emergency monetary policy setting. The NZD advanced 1.5% pushing through 0.61 and touching 0.6110 US cents, while gaining ground against other key counterparts, jumping through 0.56 Euro and advancing 0.4% against the GBP.

THE RBNZ announced new QE measures on Thursday in a bid to front load its quantitative easing program and lower yields across the curve, particularly toward the back end. Effectively the RBNZ is buying up Government bonds in a bid to support the bond and financial market while funding governments fiscal stimulus measures.

While COVID 19 remains front and centre attentions are beginning to turn to the economic aftermath and with the country in lockdown, concerns are looking as to how quickly the economy can bounce back. With social distancing measures expected to last longer than originally anticipated there are fears the looming recession will be deeper and longer than first estimated. The IMF has cited half of its 189 member countries are already seeking aid with the global recession expected to be the worst since the Great Depression. Despite enjoying strong gains since bottoming out in mid-March the NZD does not typically outperform in a low growth environment and remains vulnerable to another downward correction.

Key Movers

The US dollar struggled throughout the Easter break, having been forced lower in the wake of the Fed’s new emergency monetary policy measures. Record levels of monetary policy support have led to an increased supply of USD within global financial markets through the last 4 weeks, easing liquidity concerns and prompting a short-term USD sell off. While risks to the greenback remained skewed to the downside in the short term, the rally across key counterparts like the AUD and NZD may be running out of steam as attentions shift back toward traditional macroeconomic data sets. The uncertainty that surrounds the economic impact of coronavirus and the success of domestic exit strategies will likely prompt another run of heighten volatility in the months ahead as economies attempt to deal with extensions in social lockdown measures, low growth, muted inflation and widespread unemployment pressures.

Expected Ranges

NZD/USD: 0.5930 - 0.6180 ▲

NZD/EUR: 0.5480 - .5630 ▲

GBP/NZD: 2.0230 - 2.0680 ▲

NZD/AUD: 0.9505 - 0.9630 ▼

NZD/CAD: 0.8380 - 0.8520 ▼