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NZD tumbles as roadblocks to global growth continue to emerge

Wednesday 29 September, 2021

Daily Currency Update

NZD - New Zealand Dollar

The New Zealand dollar slipped below 0.70 US cents overnight amid a broad push toward haven assets and the USD. Commodity currency fell sharply as the whispering of a re-emergence in the reflation narrative vanished as investors clung to concerns surrounding the global growth outlook and the surfacing of new road blocks. Having edged toward an intraday high of 0.7020 the NZD fell steadily overnight, slipping below 0.6950 to mark a low at 0.6940. Fears a looming energy crisis in China and the UK will spread to other geographies, crimping growth prospects, while uncertainty surrounding the Fed outlook amid two key resignations this week have culminated in forcing investors away from risk assets toward the safe haven USD, JPY and CHF. Our attentions today remain with the underlying risk narrative, while ongoing developments in the Evergrande saga add further uncertainty. As long as markets continue to ignore traditional fundamentals, we expect the NZD will remain significantly undervalued, increasingly vulnerable to swings in risk sentiment.

Key Movers

There was plenty of price action across major currencies overnight as investors continue to grapple with expectations for global growth. A renewed bout of risk aversion reared its head through trade on Tuesday as new roadblocks emerge, crimping a positive outlook and forcing investors toward haven assets. The US dollar index advanced over half a percent while the EUR slipped below 1.17 and the CAD dipped below 0.79 despite oil prices extending their recent appreciation, trading as high as 80.75 USD a barrel. The GBP was the day's big loser, facing mounting selling pressure amid concerns the Bank of England may be on the cusp of a policy misstep. Suggestions the MPC will tighten monetary policy ahead of a correction in asset purchase spooked investors. The British recovery is incredibly fragile. Rising energy concerns, significant supply driven shocks and higher taxes are expected to weigh on growth prospect and the introduction of tighter monetary policy could foster an extended economic downturn. GBP fell 1.4% toward lows at 1.3530 and appears increasingly vulnerable to further risk off moves. Ongoing uncertainty across financial markets should continue to add support to the USD as a haven play. Until a clear road to recovery is available, and the market is able to add some conviction behind positive plays, we anticipate currency markets will maintain set ranges through the near term.

Expected Ranges

  • NZD/USD: 0.6890 - 0.7030 ▼
  • NZD/EUR: 0.5920 - 0.6020 ▼
  • GBP/NZD: 1.9320 - 1.9680 ▼
  • NZD/AUD: 0.9570 - 0.9650 ▼
  • NZD/CAD: 0.8790 - 0.8860 ▼