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Kiwi tests a break back above 0.73 as bond market volatility eases

NZD - New Zealand Dollar

The New Zealand dollar crept back above 0.73 US cents overnight amid broad based US dollar softness and an improvement in risk demand. The NZD drifted toward intraday lows through the domestic session as a risk off mood permeated the Asian session following commentary from China’s banking regulators, wherein it was suggested a property bubble, increased foreign capital inflows and elevated global bond markets posed risks to the country’s recovery and economic stability. Having touched 0.7210 the NZD then began a full 100-point recovery overnight, driven higher by a broader USD sell off and recovery across equity prices. Touching intraday highs at 0.7309 the NZD currently buys 0.7295 US cents.

Our attentions today remain with price action across bond markets, easing volatility and improved equity performance could help solidify the overnight recovery and allow an extension toward 0.7350.

Key Movers

The US dollar and Japanese yen drifted lower overnight as the markets shrugged Asian led risk aversion. Both haven assets enjoyed gains through the Australasian session as a risk off mood permeated markets following comments from top Chinese banking regulators. Having touched intraday highs through the early part of the European session the dollar index retreated through the rest of the trading day and is now two tenths of a percent below yesterday’s open. Calmness across bond markets and easing volatility looks to have opened the door for investors to gradually buy back into the risk rally. The euro pushed back toward 1.21 having briefly dipped below 1.20 while the Great British pound fell marginally short of a break back above 1.40.

Attentions today remain with the current risk narrative and price action across rates and bond markets with ADP employment data and ISM services indexes providing some guidance on US economic health.

Expected Ranges

NZD/USD: 0.7190 - 0.7350 ▲

NZD/EUR: 0.5980 - 0.6075 ▲

GBP/NZD: 1.8980 - 1.9320 ▼

NZD/AUD: 0.9280 - 0.9360 ▼

NZD/CAD: 0.9080 - 0.9260 ▲