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NZD downturn deepens as investors ignore RBNZ and chase short end US yields

Friday 26 November, 2021

Daily Currency Update

NZD - New Zealand Dollar

The New Zealand dollar continued its downward correction through Thursday, consolidating a break below 0.69 and marking new intraday lows at 0.6840. Sustained USD strength and surge across the short end of the yield curve have crippled the NZD despite the RBNZ offering a clear and definitive path to higher interest rates. Stronger US data and hawkish commentary from key Fed officials suggest a faster pace of tapering will be announced. Investors have seized on this, driving US rates and the currency higher, while ignoring domestic RBNZ policy. Markets viewed this week's RBNZ 25 basis point hike as dovish, with 40% of investors anticipating the bank would choose to raise rates by 50 basis points. The slow and measured approach disappointed investors and has compounded recent NZD weakness. Having broken key technical supports, the NZD remains vulnerable to ongoing USD upside. That said, if the Fed opts to push back on faster tapering expectations, the door opens for the NZD to bounce back above 0.70 US cents.

Key Movers

With the US markets closed in observance of Thanksgiving, price action across major currencies remained largely muted. Commodity currencies, the AUD, NZD and CAD faced some selling pressure but largely maintained a relatively well-defined range while the euro managed to stave off a dip below 1.12 pushing toward intraday highs at 1.1230 before fading into this morning's open. This recent wave of COVID-19 infections across Europe continues to worsen, hampering consumer confidence and weighing on growth expectations into the end of the year. The Great British pound edged lower on the day but held above 1.33, touching lows at 1.3305. With little of note on today’s ticket and volumes expected to remain thin through the Thanksgiving long weekend, our attentions turn to Bank of England governor Bailey as the sole catalyst sparking a macroeconomic shift in direction. Having deferred a rate hike in November, markets will be keenly attuned to any clues into future policy updates and rate guidance.

Expected Ranges

  • NZD/USD: 0.6790 - 0.6930 ▼
  • NZD/EUR: 0.6070 - 0.6150 ▼
  • GBP/NZD: 1.9290 - 1.9570 ▲
  • NZD/AUD: 0.9480 - 0.9570 ▼
  • NZD/CAD: 0.8620 - 0.8720 ▼