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Kiwi edges higher amid a session lacking any clear narrative

Friday 1 October, 2021

Daily Currency Update

NZD - New Zealand Dollar

The New Zealand dollar found support through trade on Thursday, bouncing back above 0.69 US cents in a session that otherwise lacked conviction and clear direction. Global equities remain under pressure, as growing fears supply disruptions will exacerbate a looming energy crisis forcing central banks to tighten monetary policy in a bid to control inflation has escalated in recent days. A premature tightening of monetary policy could derail the global economic recovery, bad news for the NZD and risk assets. That said, positive news from China surrounding energy production and the Evergrande saga helped prop up key commodity currencies, with the CAD, AUD and NZD all gaining. Having tested a break below 0.6860, the NZD opens this morning back above 0.69 US cents. Our attentions turn to a host of inflation indicators this evening, while a vote in US congress could add some clarity as to the path of Debt Ceiling debates. While we maintain our stance the NZD is grossly undervalued, a sustained lack of conviction across currency markets leaves the door open for further volatility and a possible test of August lows. *Please note there will be no Daily Commentary on Monday 4th of October due to the labour day public holiday in Australia.

Key Movers

Price action across currency markets on Thursday lacked direction and a clear and obvious theme. The AUD and JPY outperformed other majors in what was an unusual trading session. Typically at odds, the two currencies responded to a host of headline news events that both amplified the current risk off tone, yet bolstered demand for commodities and commodity currencies. The euro was the days big loser down three tenths of a percent, breaking below 1.16 and marking a 15-month low. The great British pound tracked sideways, finding some late momentum to push back above 1.35, yet remains vulnerable as investors continue to grapple with concerns surrounding a growing energy crisis and uncertain central bank policy. Investors continue to grapple near term headwinds against longer run expectations and as such a consistent lack of conviction should ensure volatility across majors will continue through the near-term. We anticipate the USD will continue to find support as yields rise nearer 1.6% and haven demand helps add a floor to any downside.

Expected Ranges

  • NZD/USD: 0.6830 - 0.6990 ▲
  • NZD/EUR: 0.5890 - 0.6020 ▲
  • GBP/NZD: 1.9380 - 1.9690 ▼
  • NZD/AUD: 0.9490 - 0.9590 ▼
  • NZD/CAD: 0.8690 - 0.8780 ▼