Softer yuan spills over to drive NZD below US$0.59
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Daily Currency Update
Ongoing weakness across equity markets, an extension in the risk-off tone and fresh 2024 highs across US treasury yields worked against the NZD through trade on Tuesday. The NZD slid below US$0.59 after the People's Bank of China set a lower fix for the CNY, suggesting there is some flexibility for the yuan to depreciate against the USD in line with markets and yield performance. While state banks sold USD to limit CNY losses the move weighed on the NZD as a proxy among majors, setting up a move toward intraday lows at US$0.5874. The NZD was unable to recover the early losses and tracked sideways through the overnight session bouncing between session lows and US$0.5890. Having broken resistance at US$0.59 our attention now turns to Q1 domestic CPI data. We expect headline CPI to print near 0.6% q/q with annual inflation falling below 4% and printing between 3.8% and 3.9%. A softer read below RBNZ could exacerbate recent losses as the timing and trajectory of domestic monetary policy oscillates.Key Movers
The dollar traded within a narrow range through Tuesday as with much of the action across financial markets contained to equities, yields and rates. US Treasury yields marked fresh 2024 highs while US equities had a mixed session with both the Dow and S&P 500 closing lower. The DXY index traded up 0.16%, buoyed by softness across risk currencies and an extension against the yen. The risk of intervention continues to hang over the yen, yet the USD retained its upward trajectory as markets pushed back against comments from Japanese currency officials. The prohibited cost associated with intervention has allowed markets some scope to doubt calls by officials that intervention is imminent. With US yields driving gains markets remain on edge and we continue to monitor comments. The euro and GBP changed little with the euro trading near US$1.062 and GBP sliding below US$1.2450 and trading near US$1.2430.NZ, UK and Eurozone CPI data and commentary across several Central banks with members from the Fed, Bank of England and European Central Bank hitting the wires will drive direction through the day.
Expected Ranges
- NZD/USD: 0.5850 - 0.5950 ▼
- NZD/EUR: 0.5500 - 0.5600 ▼
- GBP/NZD: 2.1000 - 2.1300 ▲
- NZD/AUD: 0.9150 - 0.9250 ▲
- NZD/CAD: 0.8100 - 0.8200 ▼