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Kiwi on the up and up as risk appetite renewed

Thursday 21 October, 2021

Daily Currency Update

NZD - New Zealand Dollar

The New Zealand dollar extended gains through trade on Wednesday, punching through 0.72 US cents. With little headline data on hand and an absence of major news flow, risk appetite continued its resurgence driving gains across equities, commodity currencies and other risk assets. Having tracked sideways through the domestic session the NZD bounced of 0.7160, extending through 0.72 to touch intraday highs at 0.7210. A broader assessment of market conditions shows aversion to risk has fallen through October as investors set aside concerns that so plagued direction in September. With risk indicators falling and the NZD rising it is fair to say the recent rally could be extended should risk appetite continue to improve. The macroeconomic calendar is absent of headline data today and our attentions remain focused on the evolving risk narrative. We are conscious the risks posed by stagflation, withdrawal of central bank monetary support, global energy concerns, supply chain bottlenecks and a downturn in Chinese growth prospects could prompt a swift correction in risk demand. We now eye a break above 0.7315 as a key marker for a broader extension toward 0.74 US cents.

Key Movers

The US dollar was the worst performing major currency on Wednesday, driven lower by a resurgence in demand for risk and a correction in expectations for Fed monetary policy. The DXY dollar index gave up another 0.3% on the day as investors extended gains across the CAD, AUD and NZD while supporting the EUR and pushing the GBP back through 1.38. UK CPI inflation data remained well above the Bank of England’s target, although did fall short of market expectations, perhaps easing some of the pressure on the MPC to raise rates. That said with the BoE expecting inflation to push above 4% by year-end a rate hike in November is all but priced in. The JPY and CHF followed the USD lower as the broader move away from safe havens soured demand. With little of note on today's macroeconomic calendar our attentions remain with the broader risk narrative.

Expected Ranges

  • NZD/USD: 0.7090 - 0.7250 ▲
  • NZD/EUR: 0.6130 - 0.6220 ▲
  • GBP/NZD: 1.9090 - 1.9320 ▼
  • NZD/AUD: 0.9520 - 0.9620 ▲
  • NZD/CAD: 0.8830 - 0.8910 ▲