Daily Currency Update

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Kiwi buoyed as equities find renewed support

NZD - New Zealand Dollar

The New Zealand dollar bounced off lows, pushing back through 0.7150 on Tuesday amid renewed demand for risk and a broader USD correction. Support for equities led by Chinese backed investment firms helped drive gains across tech stocks, suppressing risk aversion and driving gains across emerging market and commodity pared currencies. Having touched intraday lows at 0.7104 the NZD advanced through 0.7150 to touch highs at 0.7181 before edging marginally lower into this morning's open. With resistance forming on moves approaching 0.7180 our attentions remain with bond and treasury yield performance for direction. Signs that the recent run up in US treasury yields may have been overdone, could open the door for a broader push back toward risk assets should investors look to correct gains. Focus shifts to upcoming 10- and 30-year bond auctions through the coming days with demand a key indicator of sentiment. Softening demand for US bonds will likely mean increased demand for equities and could see the NZD test a break back above 0.72 and 0.7250.

Key Movers

The US dollar retreated through trade on Tuesday as the reversal in risk demand, prompted a correction in recent gains. Having touched fresh highs against the EUR and JPY through the early part of the session, the dollar index lost five tenths of a percent through the back half of the trading day as investors moved away from government bonds and treasury yields and back to tech stocks and equities. Having broken 109 against the JPY for the first time in 9 months the USD shifted back to 108.5 while the euro bounced off lows at 1.1835 to push back through 1.19.

Our attentions now turn to US CPI data for insight into recent price pressures. With the senate pushing through President Biden’s near 2 trillion dollar stimulus plan, concerns inflation could force Fed policy change are mounting. An outsized CPI print could put pressure on risk demand for fears the Fed will tighten financial conditions to stave off rising price pressures.

Expected Ranges

NZD/USD: 0.7090 - 0.7250 ▲

NZD/EUR: 0.5980 - 0.6050 ▲

GBP/NZD: 1.9180 - 1.9520 ▼

NZD/AUD: 0.9240 - 0.9350 ▼

NZD/CAD: 0.8990 - 0.9130 ▲