Daily Currency Update

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Kiwi tumbles as USD outpaces all major counterparts

NZD - New Zealand Dollar

The New Zealand dollar fell sharply overnight, giving up over 1% against the USD amid a wary risk backdrop and stronger than expected US macroeconomic fundamentals. ISM services PMI data wrote in at record highs, while the Fed’s Beige book pointed to ongoing supply constraints and increasing input costs. Both wrote in ahead of consensus and heightened fears higher production costs will ensure ongoing inflation pressure through the near term. ADP employment data also outperformed, printing some 50% ahead of expectations and proffering a strong back drop to tonight’s official labour market report. Investors responded to the stronger reads by front running expectations the Fed will now move forward discussions to taper bond purchases. Having touched intraday lows at 0.7128, the NZD edged marginally higher into this morning’s open and currently buys 0.7145 US cents.

With the NZD hanging onto the bottom end of recent 2 month ranges, a strong non-farm payroll print this evening and increased inflation pressure next week could force the currency through supports in the near term, though we still expect sustained USD weakness and positive domestic fundamentals will carry the NZD higher come year end.

Key Movers

The USD was far and away the biggest mover overnight, outperforming all major currencies in one of its best daily appreciations in 9 months. The DXY index advanced some 0.7% as treasury yields rebounded and stronger than expected macroeconomic fundamentals drove expectations for a change in monetary policy and QE.

While falling against the USD, the GBP still outperformed most other major counterparts, amid sustained expectations economic activity will continue to recover ahead of schedule as the economy re-opens. Having been range bound between 1.41 and 1.42 for much of the last few weeks, Sterling slipped briefly below supports to touch 1.4090, before edging higher into this mornings open.

The euro sits sharply lower, giving up 1.22 and 1.2150 to buy just 1.2119 at time of writing, while the USD pushed above 110 against the yen.

Attentions tonight are firmly with US non-farm payroll data. If they mirror the bumper ADP employment print, the dollar could carry the rally into the weekend and add more downward pressure on major counterparts.

Expected Ranges

NZD/USD: 0.7050 - 0.7220 ▼

NZD/EUR: 0.5850 - 0.5930 ▼

GBP/NZD: 1.9605 - 1.9880 ▲

NZD/AUD: 0.9290 - 0.9340 ▼

NZD/CAD: 0.8610 - 0.8710 ▼