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Kiwi gives up 0.65 amid sustained US dollar uptick

Tuesday 7 June, 2022

Daily Currency Update

The New Zealand dollar tracked lower through trade on Monday giving up 0.65 US cents amid a sustained US dollar recovery. Markets carried the USD’s post Non-farm payroll momentum into a new trading week propping up the dollar index on expectations the Fed will maintain its aggressive pace of monetary policy normalisation. Friday’s robust print emboldened investors to price in 3 consecutive 50 basis point hikes in June, July and September. Having touched intraday highs at 0.6535 the NZD tumbled below 0.65 overnight marking session lows at 0.6485. While markets adopted a cautious tone reports Beijing would re-open cinema’s restaurants and public transport networks helped ease some risk aversion. Key commodity prices rallied adding some support to the NZD. With little of note on today’s domestic dockets our attentions turn to the RBA monetary policy meeting and rate statement. The NZD testing a break below supports at 0.9020 a hawkish surprise could see the NZD break below 0.90 for the first time since August 2018.

Key Movers

The USD retained Friday’s momentum advancing against all major counterparts through trade on Monday. The Bloomberg dollar index jumped over half a percent as investors moved to price in 144 basis point rate adjustment through the next 3 months. Friday’s robust non-farm payroll print steamrolled calls for the Fed to re-assess its path to Monetary policy normalisation, driving investors price in 3 consecutive 50 basis point rates hikes. The revision in US rate expectations helped drive US rates higher a move extended through trade on Monday. US 10 year rates broke above 3% for the first time in 3 weeks while 2 year rates climbed 8 basis points to 2.73%. Having forced the Euro back below 1.07 the USD touched fresh 20 year highs against the Yen, closing in on a break above 132. The Yen has come under sustained pressure amid the resurgence in global rates as the Bank of Japan reiterated its commitment to accommodative monetary policy, further highlighting the gap between the BoJ and other central banks. The Great British Pound held up reasonably well in the face of US dollar strength emboldened by Boris Johnsons comfortable defeat of a no confidence vote. Having jumped above 1.2550 the GBP edged lower under the weight of US rates and opens this morning buying 1.2520. Our attentions this week remain with US CPI and the ECB policy update. Both present significant risk events and will shape near term expectations for monetary policy. We expect price action.

Expected Ranges

  • NZD/USD: 0.6450 - 0.6550 ▼
  • NZD/EUR: 0.6020 - 0.6120 ▲
  • GBP/NZD: 1.9080 - 1.9420 ▲
  • NZD/AUD: 0.8970 - 0.9120 ▼
  • NZD/CAD: 0.8130 - 0.8230 ▼