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NZD gives up gains as risk-off shift prompt sharp correction

NZD - New Zealand Dollar

The New Zealand dollar fell steadily overnight as markets chased a risk-off move following equities and yields lower amid fears vaccine rollouts will be delayed. Having tracked sideways through much of the domestic session the NZD gave up intraday highs at 0.7240 overnight forced lower as investors looked to haven assets, driving the USD higher. The discord between the EU and AstraZeneca deepened overnight amid fears the pharma giant will be unable to deliver on its original schedule of vaccine availability. The EU urged AstraZeneca to fulfill its commitment, stoking fears delays in widespread immunisation will significantly hamper both Europe’s health and economic recovery. Having fallen through 0.72, the NZD touched 0.7150 before pairing losses and creeping back toward 0.7190 ahead of commentary from the FOMC and Federal Reserve. While Fed Chair Jerome Powell offered little out of the ordinary, optimism surrounding vaccine rollouts and the Biden administrations COVID-19 plan, coupled with a commitment to accommodative monetary policy helped foster expectations the US will bounce back quickly in a post COVID-19 environment. Investors capitalized on US dollar gains, underpinning the rebound and forcing the NZD back toward 0.7150.

With little of note on today’s domestic agenda, our attentions remain with the broader risk narrative ahead of US GDP data Thursday. With supports intact at 0.7150 and 0.7080 we are keenly attuned to any signal a deeper risk-off move could be afoot.

Key Movers

The US dollar lead gains through trade on Wednesday buoyed by a broader shift in risk demand. The DXY index advanced four tenths of one percent fueled by a correction in pro-cyclical commodity currencies and broader euro losses. The single currency fell from 1.2160 toward 1.21 following commentary from ECB officials they would closely monitor the recent appreciation against the USD while highlighting the market has significantly underestimated the effects and impact of further rate cuts. The comments suggest the ECB could be prepared to cut rates again in a bid to stave off further euro gains and drive growth through the worst of the pandemic. Fears vaccine rollouts across Europe will be delayed on the back of production and logistics issues only heightened demand for the USD as the vaccine gap now becomes a key marker in determining currency value and expectations for a post COVID-19 recovery.

Expected Ranges

NZD/USD: 0.7080 - 0.7250 ▼

NZD/EUR: 0.5860 - 0.5970 ▼

GBP/NZD: 1.8920 - 1.9280 ▲

NZD/AUD: 0.9305 - 0.9410 ▲

NZD/CAD: 0.9120 - 0.9230 ▼