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Kiwi falls 1% as the Greenback fights back

NZD - New Zealand Dollar

The Kiwi fell 1% on Friday after a resurgent USD finally found some support and rose 0.4% against a basket of currencies. Opening this morning at 0.6630, the Kiwi is set to enjoy a quiet day on the economic calendar with direction to be driven by global macro-economic forces.

It was a day of 2 halves for the Kiwi with the Asian session trading as high as 0.6715, its highest point since January on the back of USD weakness. Nevertheless, during the American session the Greenback clawed its way back significantly with the USD Index rebounding from its lowest level in more than two years. Despite the resurgence, the Greenback still recorded its worst monthly fall since January 2018. The catalyst for the shift wasn’t an obvious one in this case with the Democrats and Republicans both still in a stalemate on extending the expired stimulus package and little economic data to drive direction. Nevertheless, the Greenback was oversold after its recent big move lower and the movement upward is a sign of consolidation.

Moving into a new week, the Kiwi will keep a close eye on Australia’s COVID-19 situation with little on the economic calendar to drive direction. Off-shore, the NZD will again trade to the beat of the see-sawing USD.

Key Movers

The USD edged higher through trade on Friday, climbing against a basket of major counterparts having touched two-year lows. In the absence of any headline data event or obvious catalyst the Bloomberg dollar Index advanced half a percent as investors appeared to take profit and cover shorts in a broad based month end re-balancing. A shift in risk sentiment drove direction into the weekly close as the EUR gave up upside while the JPY, NZD, AUD and GBP all drifted lower. The Eurozone recorded it largest contraction on record through Q2 and inflation rose unexpectedly. The surprise print had little impact on markets but did take some of the sheen off the recent rally.

With US lawmakers unable to reach an 11th hour stop gap agreement, fiscal stimulus remains in sharp focus this week. With unemployment benefits ending last week and Treasury Secretary Steven Mnuchin suggesting “there is still a lot of work to do” a long and protracted debate between Republicans and Democrats risks hurting consumer led growth. Political uncertainty is creating added downward pressure on the USD and despite Friday’s bounce the broader outlook remains bearish.

Expected Ranges

NZD/AUD: 0.9229 - 0.9344 ▼

NZD/CAD: 0.8839 - 0.8951 ▲

NZD/EUR: 0.5579 - 0.5691 ▼

GBP/NZD: 1.9643 - 1.9840 ▲

NZD/USD: 0.6581 - 0.6692 ▲