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NZD edges higher as CNY hits three-year highs

Thursday 9 December, 2021

Daily Currency Update

The New Zealand dollar edged higher through trade on Wednesday, maintaining its upward momentum to break above 0.68 US cents amid renewed optimism surrounding the Chinese economic outlook and fading fears the Omicron variant will derail the global economic recovery. Investors remain hopeful that a reduction in the RRR requirement for banks and eased restrictions on the property market will help reset the Chinese economy and stop the spread of contagion amid the Evergrande restructuring. The accommodative policy program has helped drive CNY gains, pushing the local unit toward three-year highs and dragging both the NZD and AUD along with it. Often consider a proxy to Chinese growth and the yuan, the NZD the resurgence in risk sentiment and improved outlook has helped the NZD stave off a break below 0.67 US cents. Having tested fresh lows on Friday the currency has recovered to mark overnight highs at 0.6820. Our attentions turn to a number of key domestic data sets today. Manufacturing, Wholesale sales and Business services data will all help shape our Q4 GDP predictions. With much of the country restricted by health and safety protocols we expect a modest reading that belies the current environment.

Key Movers

Price action across major currencies was mixed through Wednesday as the CAD, GBP and JPY all fell, while the euro found support. The CAD came under pressure following the Bank of Canada Monetary Policy update, a statement that afforded little change from last month and failed to meet the market's hawkish expectations. The incremental shift in narrative fell short of investors' aggressive rate hike expectations and prompted a correction in bond prices at the short end of the yield curve, forcing the CAD lower. Downward pressure on the CAD was compounded by an uptick in global bond rates. US and European treasuries both advanced, leaving the UK and Japanese bond rates behind. The yen and GBP have come under increasing pressure amid the backdrop of higher global rates and the USD pushed back toward 114 while the GBP temporarily broke below 1.32, touching 1.3170. Attentions today turn to US jobs data while Global bond prices and the broader risk narrative continue to drive direction.

Expected Ranges

  • NZD/USD: 0.6720 - 0.6870 ▲
  • NZD/EUR: 0.5950 - 0.6030 ▼
  • GBP/NZD: 1.9280 - 1.9550 ▼
  • NZD/AUD: 0.9450 - 0.9530 ▼
  • NZD/CAD: 0.8520 - 0.8670 ▲