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NZD fails to keep pace with broader risk on move

Tuesday 7 December, 2021

Daily Currency Update

The New Zealand dollar tracked sideways through trade on Monday, failing to respond to a broader risk on rally across commodity currencies. Market sentiment improved amid early signs the omicron variant may not be as severe as first feared while confirmation Chinese policy makers will continue to support the embattled property market and wider domestic economic performance helped fuel risk demand. Commodity currencies led by an uptick in oil prices rallied, yet the NZD was left behind. Struggling to mount any meaningful extension beyond 0.6750. The currency tracked between 0.6740 and 0.6760 for much of the day while giving up ground to other key counterparts, slipping below 0.96 against the AUD while giving up 0.8650 against the CAD. With little of note on today macroeconomic ticket our attentions remain affixed to omicron headlines. While fears seem to have abated volatility indices remain elevated and we expect price action will remain whippy over the coming days and weeks.

Key Movers

A positive risk backdrop helped fuel gains across risk assets and commodity currencies on Monday, driving the JPY and CHF toward the bottom of the leader board as the worst performing majors to start the week. The USD has rebounded back above 113.50 against the Yen while the Pound enjoyed incremental gains, staving off a break below 1.32 and the Euro continues to underperform. Market sentiment remains whippy and volatility indices elevated, the VIX volatility index trading near 30% it s highest level in 6 months highlights just how nervous investors are. Elevated volatility means larger price swings and we expect currency values will fluctuate wildly over the coming days and weeks as we await clear evidence this latest COVID 19 variant will not disrupt the recovery. Our attentions today turn to the RBA monetary policy update, while US and Chinese trade data and German industrial production dominate the macroeconomic ticket.

Expected Ranges

  • NZD/USD: 0.6720 - 0.6820 ▲
  • NZD/EUR: 0.5950 - 0.6030 ▲
  • GBP/NZD: 1.9520 - 1.9780 ▲
  • NZD/AUD: 0.9530 - 0.9650 ▼
  • NZD/CAD: 0.8580 - 0.8690 ▼