Daily Currency Update

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Kiwi resurgent and poised to break above 0.67 US cents

NZD - New Zealand Dollar

The New Zealand dollar rally continued Monday, marking fresh multi-month highs and testing 0.67 amid broad based US dollar weakness. The NZD touched intraday highs at 0.6693 and appears poised to extend the recent upturn. Mounting concern surrounding exponential growth in new infections across the US and expectations for a long and protracted economic are weighing on the world’s base currency, while renewed optimism a vaccine may be available sooner than first expected have bolstered demand for risk. With the promise of US economic strength no longer a given and interest rate spread collapsing there is scope to suggest the US dollars multi year bull run is over, opening the door for an NZD push toward 0.70 US cents. We anticipate the NZD will enjoy a sustain upturn throughout H2, bringing forward our expectations for a broader USD correction. Of course there are risks to this outlook, uncertainty across financial markets remains high and conviction thin, a broader shift in risk demand and widespread global shutdown amid a 2nd wave of infections across Europe could force a flight to safety, weighing on the NZD.

Key Movers

The US dollar collapsed to a two-year low against the Euro on Monday amid losses against most major counterparts as the spread of COVID 19 continues unchecked. Florida passed New York as the State with the second highest number of Coronavirus infections, while California continues to battle an unwelcome surge in new cases, now the worst hit of all 50 States. There is mounting concern that unemployment benefits will dry up come the end of the week. Republicans are tipped to put forth a relief bill on Monday/Tuesday at which point Democrats will have the opportunity to critique the proposal and push their own agenda. With partisan politics in full swing leading into the election there is real scope to suggest both parties will not agree a compromise in time, escalating calls for a short-term stopgap measure to prop up those devastated by record job losses. Heightened uncertainty within the US has forced us to push back our timeline for recovery with the US likely to lag major counterparts in bouncing out of the pandemic and economic crisis. The Fed is expected to affirm its commitment to long run low interest rates on Wednesday with uber loose monetary policy likely to be in play for years to come. As real US interest rates remain under pressure and US economic performance falters there is ample capacity for extended USD downside through H2.

Capitalising on USD weakness the Euro upturn continued Monday, outstripping major counterparts and pushing through 1.17 and 1.1750 to touch two-year highs at 1.1775. The single currency has been the primary benefactor in the shift away from the worlds base currency as the EU proactive and aggressive fiscal support program has bolstered hopes for a swift economic recovery and a unified Europe.

Expected Ranges

NZD/USD: 0.6580 - 0.6730 ▲

NZD/EUR: 0.5630 - 0.5720 ▼

GBP/NZD: 1.9080 - 1.9420 ▲

NZD/AUD: 0.9305 - 0.9410 ▲

NZD/CAD: 0.8880 - 0.9010 ▲