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Kiwi bounces off supports as US treasury yields dip

NZD - New Zealand Dollar

The New Zealand dollar extended off lows approaching 0.70 through trade on Thursday, pushing back above 0.7050 amid broader US softness. A positive risk backdrop and decline in US treasury yields helped drive gains across commodity currencies, pushing the NZD toward intraday highs at 0.7062. With focus turning to domestic data, expectations for headline CPI increased yesterday amid price pressures and increased costs across the economy. With forecasts now pricing in a move toward the top of the RBNZ’s 1-3% range by year end, increasing inflationary pressure may prompt RBNZ policy action sooner than expected, potentially bolstering demand for the NZD in the current low yield environment.

Our attentions today remain with the broad market narrative. We anticipate the NZD will struggle to extend beyond near term highs while maintaining support on moves approaching 0.70.

Key Movers

The US dollar index fell through trade on Thursday giving up 4 tenths of a percent amid a shift in US treasury yields and positive risk backdrop. So far this month the dollar has retreated from four and half month highs seen in late March, giving up ground to commodity currencies, the euro and the yen, as investors consolidate positions and correct expectations, searching for a catalyst to drive conviction. The euro pushed back through 1.19 to touch intraday highs at 1.1926, while USD/JPY has given up gains above 110, retreating toward 109 following a correction in Treasury yields.

Surprisingly the Great British pound continued the weeks downward correction, dipping below 1.3750 to mark fresh lows at 1.3720. The AstraZeneca vaccine remains a lynchpin in the UK’s vaccination program and with concerns the vaccines rare side effects may limit its rollout program, the timeline to recovery has been extended as regulators and officials rush to secure an alternative for younger Britons.

With little of note on today’s macroeconomic ticket we expect moves across currency markets will remain largely muted.

Expected Ranges

NZD/USD: 0.6990 - 0.7120 ▲

NZD/EUR: 0.5890 - 0.5950 ▲

GBP/NZD: 1.9380 - 1.9620 ▼

NZD/AUD: 0.9190 - 0.9260 ▲

NZD/CAD: 0.8820 - 0.8920 ▲