New Zealand dollar remains under pressure
Daily Currency UpdateThe New Zealand dollar opens slightly weaker when valued against the Greenback currently trading at 0.6744. NZD/AUD is up 0.5% to 0.9380. While NZD/JPY is flat, the NZD is lower on the other crosses, with NZD/EUR down over 1% to 0.6160. Yesterday on the data front REINZ house price index rose by 0.5% m/m in February, but was weaker on our seasonally adjusted estimate to be down 3% from the peak just three months ago, well on its way towards a possible double-digit fall by the end of the year. Sales volumes fell 33% y/y, another indicator of weakness in the housing market.
The New Zealand Government announced it will slash 25 cents per litre off fuel tax and halve public transport costs for an initial three months to help ease the financial pressure at the petrol pump. The tax reduction, which is expected to cost $350 million will come into effect on Tuesday and save motorists $11 to $17 per average fill-up, depending on the vehicle. Halving the cost of public transport expected to come into force from April comes with a $25m to $40m price tag. The New Zealand Government has come under pressure to help alleviate three-decade high inflation, with the cost of unleaded petrol now more than $3 per litre in parts of New Zealand and there have been warnings it could soon hit $4.
Looking ahead this week and on Wednesday we will see the release of the New Zealand Current Account which is directly linked to currency demand. A rising surplus indicates that foreigners are buying more of the domestic currency to execute transactions in the country. Finally on Friday we will see the release of the countries quarterly Gross Domestic Product (GDP) which is forecast to rise by 3.2%.
Key MoversOvernight the US dollar index (DXY), which measures the greenback against six major peers, was down 0.25% at 98.883 but was correcting in the North American market as risk appetite dies dwindles on Wall Street in choppy trade. The Dow Jones Industrial Average was lower by 0.15% and the S&P 500 was down 0.72%. The US Federal Reserve is widely expected to raise interest rates at its meeting ending on Wednesday, with investors pricing in a 99% chance of a 25 basis point hike. The last commentary from the Fed Chairman Jerome Powell flagged multiple rate hikes this year considering surging inflation. These expectations for progressive Fed rate hikes this year suggest it is set to remain the greenback well supported going forward.
- NZD/USD: 0.6650 - 0.6850 ▼
- NZD/EUR: 0.5650 - 0.5850 ▼
- GBP/NZD: 1.9000 - 1.9200 ▲
- NZD/AUD: 1.0550 - 1.0750 ▲
- NZD/CAD: 0.8550 - 0.8750 ▼