Daily Currency Update

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Kiwi bounces off near two month lows amid improved risk sentiment

NZD - New Zealand Dollar

The New Zealand dollar crept higher overnight recouping losses suffered throughout the domestic session to trade in line with yesterday’s open, buying 0.6545 US cents. The slew of negative headlines continued to overwhelm investors, forcing the NZD toward intraday lows at 0.6510 before a rebound in equities and the suggestion a US fiscal support package may be agreed before the election, bolstered risk demand and helped drive the kiwi to session highs just above 0.6560. Sentiment continues to steer direction as markets ignore underlying fundamentals. A mixture of positive and negative headline data events ensured markets remained choppy and will mean the NZD is vulnerable to further downside should sentiment continue to sour. While we anticipate the NZD will find medium to long term support against the USD, uncertainty surrounding the global growth outlook and political landscape will ensure a period of consolidation into the end of the year. We expect the currency will bounce between 0.64 – 0.68 as markets respond to fluctuations in risk trends.

Key Movers

Softness across haven assets saw the USD, CHF and JPY give up gains overnight as improved risk sentiment prompted a push back toward growth led assets. Having broken below 1.1650 to touch 1.1630, the euro recouped losses pushing back toward 1.17 even while the ECB issued another 175billion in cheap three year funding to banks across the currency bloc.

The Great British pound tested a break below 1.27 touching 1.2690 before pushing back toward 1.28, running out of steam at 1.2770. Sterling remains vulnerable to volatility, as fears unemployment levels will rise when the current unemployment support program ends and the likelihood of further lockdowns as restrictions tighten in a bid to combat the second wave in infections, force investors to continually reassess positions.

Attentions remain with current themes as headlines direct sentiment and dominate direction into the weekly close.

Expected Ranges

NZD/USD: 0.6450 - 0.6590 ▼

NZD/EUR: 0.5580 - 0.5650 ▼

GBP/NZD: 1.9280 - 1.9620 ▼

NZD/AUD: 0.9210 - 0.9340 ▲

NZD/CAD: 0.8680 - 0.8770 ▼