Home Daily Commentaries New Zealand dollar heads towards 0.69 US cents amidst risk appetite

New Zealand dollar heads towards 0.69 US cents amidst risk appetite

Daily Currency Update

The New Zealand dollar opens slightly stronger this morning when valued against the Greenback.  The Kiwi dollar appreciated significantly overnight, trading 0.8% higher amidst broad-based weakness in the Greenback.  The Kiwi dollar had been trading just above 0.68 U.S. cents immediately prior to the Federal Open Market Committee (FOMC) meeting and it is now approaching 0.69 U.S. cents.  On the data front, yesterday saw the Reserve Bank of New Zealand (RBNZ) lower their interest rate expectations after a slightly weaker than expected NZ quarterly Gross Domestic Product (GDP) release.  While the 3% q/q increase in GDP in Q4 was greater than the 2.3% the RBNZ has forecast, the current Omicron outbreak means Q1 is shaping to be much weaker.  Receivers returned to the swap curve, with the 2-year swap rate falling 4bps on the day, back to 3%, while the 10-year rate was 2bps lower.

Looking ahead and today in New Zealand and there are no scheduled economic releases. From a technical perspective, the NZD/USD pair is currently trading at 0.6880. We continue to expect support to hold on moves approaching 0.6871, while now any upward push will likely meet resistance around 0.6896.

Key Movers

After yesterday’s  Federal Open Market Committee (FOMC) meeting, risk appetite has continued to recover.  US equities roared higher into the market close, with the S&P500 and NASDAQ closing 2.2% and 3.8% higher respectively.  In the United Kingdom, Bank of England raised its cash rate by 25bps overnight, as expected,  as inflation soars.  The Bank of England has responded to the likelihood that the war in Ukraine will push inflation to around 10% this year by raising interest rates back to the pre-pandemic level of 0.75%. The UK monetary policy committee (MPC) voted 8-1 to increase borrowing costs by 0.25 percentage points, the first time the Bank has raised rates at three successive meetings in more than two decades.

Expected Ranges

  • NZD/USD: 0.6800 - 0.7000 ▲
  • NZD/EUR: 0.6100 - 0.6300 ▲
  • GBP/NZD: 1.9000 - 1.9200 ▲
  • NZD/AUD: 1.0600 - 1.0800 ▲
  • NZD/CAD: 0.8550 - 0.8750 ▲