Daily Currency Update

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Kiwi extends Friday’s gain, marking new year to date high

NZD - New Zealand Dollar

The New Zealand dollar extended its advance through trade on Monday, capitalising on Friday’s upturn to test 0.6750. The NZD marked fresh year to date highs touching 0.6763 overnight after US Federal Reserve Vice President Richard Clarida re-affirmed the Banks commitment to ultra-loose monetary policy and an adjustment in its inflation management platform. While the RBNZ has adopted its own dovish program of monetary policy the Fed’s aggressive loosing of financial conditions has more than offset moves made by the RBNZ and allowed the NZD to extend gains through the last four months. With little appetite for the world’s base currency we expect ongoing US dollar weakness will underpin the Kiwi upturn and open the door for an extension toward 0.68 -0.70 into the end of the year.

Attentions today remain affixed to broader flows, with little of note on the domestic docket. With the RBA policy meeting posing an important market for NZD/AUD direction. Having toyed with a break below 0.91/0.90 a broadening in the gap between monetary policy programs could force the NZD through supports and open the door for a break toward 0.89/0.88.

Key Movers

The US dollar depreciation continued through trade on Monday, marking a fresh two year low to close the month 1.5% lower. The fourth straight monthly depreciation is the longest run of losses in three years and a clear signal there is little appetite for the world’s base currency. The Federal Reserve doubled down on its ultra-dovish monetary policy platform last week, amending its inflation management system and opening the door to an extended period of record low interest rates. With the FOMC reinforcing its bearish stance there is little scope for a near term dollar recovery.

The Euro continued its monthly advance pushing back through 1.19 to touch daily highs at 1.1960. The single currencies advance coincides with the dollars depreciation as investors shift focus away from the greenback in an attempt to chase a higher yield on expectations Europe will recover from the Coronavirus faster that the US. Having met resistance on approaches to 1.20 the resurgence of a second wave in infections is weighing on the Euro as the threat of reinstated lock down measures loom larger.

The Yen was the softest of the majors drifting lower against the USD and giving up gains won last week. The USD pushed back toward 106, touching intraday highs at 106.10 before correcting lower into this mornings open.

Expected Ranges

NZD/USD: 0.6630 - 0.6790 ▲

NZD/EUR: 0.5580 - 0.5670 ▼

GBP/NZD: 1.9680 - 2.0020 ▲

NZD/AUD: 0.9050 - 0.9160 ▼

NZD/CAD: 0.8720 - 0.8830 ▼