Daily Currency Update

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Kiwi driven lower as risk sentiment shifts

NZD - New Zealand Dollar

The New Zealand dollar underperformed through trade on Wednesday, moving lower against most major counterparts as demand for risk soured. The NZD moved back below 0.61 and on 0.60 on its way to intraday lows at 0.5955 before edging marginally higher into the daily close. Having lost nearly 2% against the USD the kiwi also shifted lower against the AUD, GBP, EURO and JPY, highlighting just how vulnerable currency is to fluctuations in broader risk sentiment. Equities and US treasury yields both moved lower amplifying the risk off mood as attentions shift to key US data sets and corporate earnings as markers of broader economic health. Softness across US corporate earnings could well prompt another risk off run and may see the Kiwi test recent lows. While we expect the medium-term fair value outlook holds above 0.60, short term risk off plays could foster another downward run.

Key Movers

The US dollar outperformed through trade on Wednesday, advancing against most major counterparts as risk sentiment soured. Equities and treasury yields plunged lower, commodity currencies under-performed, while the EUR, GBP and JPY all suffered modest corrections. Demand for risk shifted Wednesday as key US data points showed just how wide reaching the economic fallout from the coronavirus will be. U.S retail sales suffered their largest monthly drop in March while manufacturing indexes touched record lows, with the NY Empire State manufacturing index falling twice as far as conservative estimates suggested. The poor macroeconomic performance coupled with a bleak report issued by the IMF have forced investors toward safe haven assets and helped break the recent USD downturn.

The Canadian dollar suffered heavy losses as the Bank of Canada announced new plans to increase its QE program. The BoC will begin purchasing investment grade and provincial bonds in a bid to stabilise financial markets and essentially fund fiscal stimulus measures.

Attentions turn again to US unemployment claims as broader risk appetite continues to steer direction.

Expected Ranges

NZD/USD: 0.5880 - 0.6120 ▼

NZD/EUR: 0.5380 - 0.5560 ▼

GBP/NZD: 2.0580 - 2.1150 ▲

NZD/AUD: 0.9450 - 0.9590 ▼

NZD/CAD: 0.8380 - 0.8520 ▼