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NZD upturn falters as risk sentiment sours

Friday 22 October, 2021

Daily Currency Update

NZD - New Zealand Dollar

The New Zealand dollar opens lower this morning unable to hold onto four and a half month highs amid a downturn in risk appetite. Having touched 0.7220, the NZD fell through the latter stages of the domestic session and overnight, slipping back below 0.72 to touch lows at 0.7140. There appears no real catalyst for the shift in risk demand, rather markets just turned their attentions back to the myriad of headwinds plaguing the global economic recovery. Inflation concerns continue to fester as breakeven inflation estimates rose, touching 9-year highs overnight, while expectations for Federal Reserve rate hikes firmed as investors price in two rate adjustments in the 2nd half of 2022. Our attentions remain affixed to the broader risk narrative for direction into the weekly close and next week. With the recent NZD upturn predicated on sustained risk appetite, a shift in sentiment will likely foster a correction back toward 0.70 US cents.

Key Movers

Safe haven currencies rebounded through trade on Thursday with the JPY, CHF and USD topping gains across majors amid a shift in risk sentiment. Expectations for a fed rate hike firmed yesterday as the yield curve flattened and markets priced in two rate hikes through H2 2022. After a brief respite and expectation the pace of hikes may be slower than initially estimated, the firming in the short end yield curve helped remind markets the period of uber accommodative monetary stimulus is drawing toward a close. Equities fell slightly as commodity currencies bore the brunt of the correction with energy sensitive commodities underperforming. With little of note on today’s macroeconomic docket we look to Fed president Jerome Powell for further forward guidance, while fluctuations in sentiment will guide the broader narrative into the weekly close.

Expected Ranges

  • NZD/USD: 0.7030 - 0.7220 ▼
  • NZD/EUR: 0.6090 - 0.6220 ▼
  • GBP/NZD: 1.9090 - 1.9350 ▲
  • NZD/AUD: 0.9520 - 0.9620 ▲
  • NZD/CAD: 0.8820 - 0.8880 ▼