Daily Currency Update

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Kiwi falls short of a push through 0.66 as risk demand falters

NZD - New Zealand Dollar

The New Zealand dollar opens lower this morning following a correction in risk appetite. Having drifted sideways for much of the domestic session, the NZD crept toward fresh year-to-date highs, touching 0.66 as strength across Chinese equities helped drive the weeks positive risk-on mood. The NZD however, failed to hold onto gains throughout the European and US sessions as risk demand faltered, following another surge in COVID-19 cases across the US and a supreme court ruling that will allow New York prosecutors access to President Trump’s financial records. The President has always refused to provide his financial records, as is the custom, and the supreme court ruling opens the door to further political turmoil.

The global risk narrative continues to drive direction and while the optimism of April and May has faltered, the back drop of fiscal and monetary support has ensured a positive risk correlation remains in play. Markets are continuing to ignore domestic and global macroeconomic fundamentals and instead continue to react to changes in headline news and the fight against COVID-19. With currency movements muted through the last 2-3 weeks and broader ranges narrowing, we expect the NZD will remain range bound through much of Q3 bouncing between 0.6380 and 0.6620. Until the focus shifts back to key fundamental data sets and broader economic performance any break outside these ranges requires a distinct change in the current risk narrative.

Key Movers

The US dollar advanced through trade on Thursday, bouncing off 4 week lows amid uncertainty across equity markets and a broader shift in risk demand. The S&P 500 drifted lower as risk appetite faltered, following a surge in Coronavirus cases and a Supreme Court ruling that will allow prosecutors access to President Trump’s financial records. While the Supreme Court ruling adds further political uncertainty, the surge in new coronavirus infections is more immediately concerning. 60,000 new cases were reported on Wednesday with over 900 fatalities recorded, the biggest daily death rate since early June. With COVID-19 spreading across the US, hopes of a full scale re-opening are rapidly fading as States and Governors rush to re-impose social distancing restrictions in a bid to contain the spread and ease the burden on the healthcare system. The dollar index rallied three tenths of a percent and opens this morning back above 96.50 at 96.75.

The euro retreated through Thursday, giving up one month highs amid the broader risk off move. Having touched 1.1370 the combined currency retreated, moving back below 1.13 before finding support at 1.1280.

Attentions remain affixed to the broader risk narrative and with little of note on the macroeconomic docket, we expect the ebb and flow of risk demand will continue to drive direction.

Expected Ranges

NZD/USD: 0.6380 - 0.6600 ▼

NZD/EUR: 0.5780 - 0.5850 ▲

GBP/NZD: 1.9080 - 1.9320 ▲

NZD/AUD: 0.9390 - 0.9460 ▲

NZD/CAD: 0.8850 - 0.8950 ▲