Daily Currency Update

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Kiwi continues to outpace major counterparts

NZD - New Zealand Dollar

The New Zealand dollar recouped Monday’s losses rallying back above 0.7050 through trade on Tuesday amid broad based US dollar weakness. A surge in positive sentiment led by vaccine hopes, the promise of US fiscal stimulus and progress in Brexit negotiations helped fuel NZD gains and push the currency to intraday highs at 0.7065. With risk assets enjoying a strong start to the month there is every chance the NZD will continue to build on the 6% appreciation it enjoyed through November, although we expect further gains to be much more measured with much of the sentiment driven upside already priced in.

Attention today remains with broader market themes, as the domestic docket offers little to excite investors. We expect the NZD will continue to bounce between 0.6980 and 0.7100 as sentiment fluctuates.

Key Movers

The US dollar fell sharply through trade on Tuesday giving up 0.6% when measured against a basket of major counterparts and making it the largest daily depreciation in a month. Sustained demand for risk amid hopes leading vaccines will be available before the end of the year and renewed growth expectations for 2021 have fuelled demand for commodity currencies and risk assets driving the USD toward new two and a half year lows. The US remains mired in the midst of the COVID-19 pandemic with little sign the rate of infections is slowing down. As the effect of a Q4 retracement becomes evident it is likely the US faces a longer road to recovery with suppressed monetary policy. These expectations of a longer run accommodative monetary policy environment is driving dollar weakness with little sign the trend will change.

The Euro surged through 1.20, advancing 1% to touch highs at 1.2075, a two and a half year high. The single currency surged amid rumours Brexit talks were now entering the final stages suggesting a deal is in sight. Sterling was unable to keep pace but still enjoyed a boost pushing back through 1.34 to touch highs at 1.3440. With the Euro breaking psychological resistance at 1.20 and extending meaningfully beyond the handle the door is now open for the currency to extend gains toward 2018 highs at 1.25.

Expected Ranges

NZD/USD: 0.6980 - 0.7100 ▲

NZD/EUR: 0.5790 - 0.5920 ▼

GBP/NZD: 1.8880 -1.9220 ▼

NZD/AUD: 0.9505 - 0.9660 ▲

NZD/CAD: 0.9080 - 0.9220 ▲