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NZD marks new year to date lows as Omicron prompts risk off move

Tuesday 30 November, 2021

Daily Currency Update

The New Zealand dollar underperformed through trade on Monday, continuing Friday’s risk off downturn and marking new year to date lows. The emergence of Omicron as a variant of concern prompted a risk off run that saw the NZD test August lows at 0.6805 and despite a broader improvement in risk sentiment on Monday the NZD broke 0.68 US cents marking fresh lows at 0.6788. Having quickly bounced off the new low 0.68 remains a key marker and technical support handle as focus and attention remain squarely affixed to the evolution of the Omicron variant. Early reports appear encouraging, but it is far to soon to know whether or not this new strain will prove more virulent, contagious and vaccine resistant. Having eyed 0.67 as a potential bottom to this resent NZD downturn a worst case Covid scenario, where in omicron envelops the global economy in another wave of infections could see that sell off extend toward 0.65. We are keenly attuned to any development or update on the status of the latest Covid 19 mutation and expect heightened volatility over the coming weeks as investors and markets place bets on its expected impact.

Key Movers

The US dollar remains well supported despite a modest risk on move through trade on Monday. The world’s base currency has larger retained Friday’s risk off gains as concerns surrounding the emergence of the omicron Covid 19 variant remain front and centre. While market fears eased it is likely to be weeks not days before we have better understanding of just how contagious and virulent this new strain is. If omicron proves resistant to our current crop of available vaccines it is likely we will see an extension in demand for haven assets. Having found strong demand last week the JPY lost some of Friday’s gloss giving up three tenths of a percent to the USD and trading marginally below 114 while the Euro continues to struggle unable to consolidate above 1.13, marking intraday lows approaching 1.1260.

Expected Ranges

  • NZD/USD: 0.6750 - 0.6830 ▲
  • NZD/EUR: 0.5980 - 0.6070 ▲
  • GBP/NZD: 1.9480 - 1.9630 ▲
  • NZD/AUD: 0.9490 - 0.9590 ▼
  • NZD/CAD: 0.8650 - 0.8730 ▼