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Kiwi declines on global recession fears

Daily Currency Update

Global recession and inflation fears saw larger than normal volatility levels last week as the New Zealand dollar closed 0.8% lower on the day. The NZD/USD cross opened at 0.6363 and looked to regain momentum from the weaker than expected GDP March quarter print on Thursday but was once again under renewed pressure by losses seen on the NZ50, shedding 0.54% on the day and nearly 5% for the week.

Domestically, a better than expected BusinessNz Manufacturing Index did little for the local currency as the manufacturing sector remained under the long-term average for the month of May. A strong greenback leading into the close saw the local currency hit an overnight low of 0.6269 before recovering slightly into the final bell at 0.6313. The New Zealand dollar opens this morning at 0.6310. We expect support levels to hold onto moves approaching 0.6270 while any upward push will likely meet resistance at 0.6380.

Key Movers

The US Dollar Index (DXY) which measures a basket of currencies against the greenback extended gains by 0.82% on Friday. A large portion of trading activity came from a large dip in the Japanese Yen on Friday as it was sold off in droves following the decision by the Bank of Japan to retain their long-standing ultra-loose policy in June with the 10-year government bond yield unchanged between -0.1% and 0%. Traders were disappointed Governor Haruhiko Kuroda did not follow suit with many other central banks in at least signalling a potential to tighten monetary policy. Governor Kuroda said there are currently no plans to raise the ceiling despite a weakening yen and tightening is not appropriate at this point as the USD/JPY closed the day 2.17% higher.

Elsewhere U.S equities bounced higher on Friday despite the biggest drop in equity markets in two years last week. The Nasdaq finished 1.43% higher and the S&P500 up 0.22%. Crude oil slumped by 6% to a four-week low on concerns that interest rate hikes could cut demand for energy as recession fears loom globally. The EUR/USD closed 0.5% lower to 1.0493 and the Great British pound slid 1.11% lower against the greenback.

Expected Ranges

  • NZD/USD: 0.6270 - 0.6380 ▼
  • NZD/EUR: 0.6000 - 0.6060 ▼
  • GBP/NZD: 1.9200 - 1.9650 ▲
  • NZD/AUD: 0.9060 - 0.9150 ▲
  • NZD/CAD: 0.8180 - 0.8280 ▲