Daily Currency Update

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Kiwi increasingly vulnerable to bond price uncertainty and risk aversion

NZD - New Zealand Dollar

The New Zealand dollar slipped below 0.72 US cents overnight amid another round of bond price volatility. Having tracked sideways through much of the day, the NZD fell sharply following commentary from Fed Chair Jerome Powell. Markets had seemingly expected the Fed President would push back on recent yield gains, but instead reiterated the banks commitment to dovish themes. With treasury yields breaking higher, bond prices and equities fell, driving investors toward the USD and the NZD toward intraday lows at 0.7180.

The New Zealand dollar has failed to regain the momentum of last week and appears range bound again on moves approaching 0.73 US cents. Having bounced off supports at 0.7180, we expect the currency will maintain a narrow trading band as long as bond price volatility continues to dominate demand for risk. Our attentions today remain with bond market price action and US non-farm payroll numbers for direction into the weekend.

Key Movers

The US dollar appreciated through trade on Thursday, buoyed by a push toward haven assets and an uptick in yield values. The S&P 500 and Nasdaq both shifted lower, led by losses across tech stocks as treasury yields rose. 10-year notes pushed above 1%, dragging Bloomberg dollar index toward one-month highs. USD strength forced the euro back below 1.20 toward intraday lows at 1.1970, while the Great British pound again fell short of a break above 1.40. Having touched intraday highs at 1.4012, sterling followed the majority of major currencies lower as bond market volatility again took hold. The Canadian dollar and Norwegian kroner were the only currencies to outperform the USD. Comments from Saudi Arabia oil minister, confirming the country was in no rush to restore voluntary cuts, helped drive oil prices higher.

Attentions turn to tonight’s US non-farm payroll print as the headline macroeconomic item on the agenda, with bond price volatility continuing to steer the underlying narrative and general direction into the weekly close.

Expected Ranges

NZD/USD: 0.7130 - 0.7290 ▼

NZD/EUR: 0.5920 - 0.6030 ▲

GBP/NZD: 1.9120 - 1.9480 ▲

NZD/AUD: 0.9270 - 0.9330 ▼

NZD/CAD: 0.9020 - 0.9190 ▼