Home Daily Commentaries New Zealand dollar finds key support at US$0.62

New Zealand dollar finds key support at US$0.62

Daily Currency Update

The New Zealand dollar is slightly weaker this morning when valued against the US dollar trading at US$0.6213 at the time of writing. The NZD/USD pair comes under some renewed selling pressure on Tuesday and remains depressed heading into the North American session. The New Zealand dollar was one of the weakest performers overnight, down about 0.4%, with key support at US$0.62 holding. NZD/GBP is down over 1% to £0.5128. While NZD/AUD has been range-bound around $0.9050, the NZD is modestly weaker on the other key crosses. The US dollar buying interest remains unabated amid firming expectations for further policy tightening by the Fed, which, in turn, is seen as a key factor weighing on the NZD/USD pair.
Looking ahead today on the data front and the Reserve Bank of New Zealand is tipped to inflict more interest rate pain on New Zealand households on Wednesday by lifting benchmark cash rates 50 basis points to 4.75 per cent and signalling more increases ahead. The RBNZ previously told New Zealanders to brace for a shallow recession in 2023 as it flagged plans to take the official cash rate to 5.5 per cent in the middle of this year. The Reserve Bank appears prepared to hike until there is a contraction in aggregate demand, in order to bring demand and supply into more balance. In the June quarter, New Zealand’s inflation hit a 32-year high of 7.3 per cent before easing fractionally to 7.2 per cent in the December quarter, with food inflation rocketing to 11.3 per cent at its highest rate since 1990.

Key Movers

Business activity in the US services sector expanded in early February following January's contraction with S&P Global Services PMI rising to 50.5 from 46.8 in January. This reading surpassed the market expectation of 47.2. Additionally, the Manufacturing PMI edged higher to 47.8 from 46.9, compared to analysts' estimate of 47.3, and the Composite PMI improved to 50.2 from 46.8. As a result, the US dollar gathered strength against its rivals with the initial reaction and the US Dollar Index was last seen rising 0.35% on the day at 104.22.
In other news, U.S. existing home sales dropped to the lowest level in more than 12 years in January, but the pace of decline slowed, raising cautious optimism that the housing market slump could be close to reaching a bottom. The report from the National Association of Realtors on Tuesday also showed the smallest increase in annual house prices since 2012, which should help to improve affordability. It will, however, be a while before the housing market turns the corner. The housing market has been the biggest casualty of the Fed's aggressive monetary policy tightening. Residential investment has contracted for seven straight quarters, the longest such stretch since 2009. The 30-year fixed mortgage rate rose to an average of 6.32% last week from 6.12% the prior week, according to data from mortgage finance agency Freddie Mac. The second straight weekly increase reflected a spike in U.S. Treasury yields.

Expected Ranges

  • NZD/USD: 0.6100 - 0.6300 ▼
  • NZD/EUR: 0.5750 - 0.5950 ▼
  • GBP/NZD: 1.7550 - 1.7750 ▲
  • NZD/AUD: 1.0950 - 1.1150 ▼
  • NZD/CAD: 0.8300 - 0.8500 ▼