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Kiwi edges higher amid surge in commodity prices

Tuesday 12 October, 2021

Daily Currency Update

NZD - New Zealand Dollar

The New Zealand dollar rallied through trade on Monday, testing a break back above 0.6950 amid broader support across commodity currencies. Advancing two tenths of a percent the NZD touched intraday highs at 0.6965 before drifting back below 0.6950 in the late stages of the overnight session. Having slipped below 0.70 at the end of September the NZD has struggle to mount any real upward momentum, suppressed by a stronger USD and uncertain global economic outlook. While grossly undervalued the NZD’s near-term struggles have extended to key crosses with the currency giving up ground to the AUD. Having eyed a break toward 0.98 the NZD has suffered a steep correction through the last three weeks as domestic COVID restrictions appear likely to remain in place while NSW and Victoria begin the process of re-opening. That said, there are opportunities with the NZD rallying toward a four-month high against the Japanese Yen, poised to break above 79. Our attentions turn now to host of key US data sets, led by Wednesday’s inflation print, Thursday’s PPI drop and Friday’s retail sales read. We expect the NZD will continue to remain well supported on moves approaching 0.6880 while meeting resistance on moves approaching 0.70 and 0.71 US cents.

Key Movers

There was plenty of movement across major currencies through trade on Monday as commodity led units enjoyed sustained support while key haven currencies suffered steep falls. The Japanese yen was the days big looser plunging 1% against the USD, marking its lowest level in nearly 3 years. As inflationary fears continue to build Japan and the BoJ face the ongoing problem of domestic inflation remaining stubbornly too low. With little price pressure there is no need for policy makers in Japan to follow the hawkish stance of other major central banks and begin unwinding an uber accommodative monetary policy platform. With little hope of an interest rate hike in the foreseeable future a widening USD/JPY rate differential has fuels demand for the USD, driving JPY losses across the board. JPY weakness through the last 24 hours has helped prop up the USD with the DXY index up a quarter percent an eyeing a year to date high. Despite recent outperformance among some commodity currencies, sustained GBP, EURO and JPY weakness continue to fuel index gains and should add a floor under the USD through the near term.

Expected Ranges

  • NZD/USD: 0.6880 - 0.7020 ▲
  • NZD/EUR: 0.5960 - 0.6020 ▲
  • GBP/NZD: 1.9480 - 1.9720 ▼
  • NZD/AUD: 0.9380 - 0.9510 ▼
  • NZD/CAD: 0.8590 - 0.8690 ▲