Kiwi tests 0.67 as USD touches 7 week low
Thursday 22 October, 2020
Daily Currency UpdateNZD - New Zealand DollarThe New Zealand Dollar outperformed through trade on Wednesday, buoyed by broad based US dollar weakness and a surge in CNY demand. Much like its antipodean counterpart the NZD is often seen as a proxy to the CNY and with the Yuan marking fresh two-year highs against the dollar the NZD has been dragged back through 0.66 US cents. China’s economy continues to outperform, despite the current COVID-19 restrictions and with the promise of higher yields investors are chasing CNY gains, despite efforts from the PBOC to take the head out of the currency. The kiwi broke back through 0.66 US cents and found further support amid a broader US dollar sell off. The world’s base currency has been hamstrung by headlines surrounding the prospect of US stimulus. With talks between House speaker Pelosi and Treasury Secretary Mnuchin resuming today markets are holding out hope a deal reached before the weekend will mean a bill is passed before the election. An 11th hour deal could help push the NZD through resistance at 0.67, while a break down in talks will condemn the currency to recent ranges, at least until the election. Having touched intraday highs at 0.6680 the NZD open marginally lower on open this morning.
Key MoversThe US dollar fell through trade on Wednesday, forced toward a 7-week low amid hopes a fiscal stimulus relief bill may still be passed before the election. Headlines continue to dominate direction and while Tuesday’s self-imposed deadline has passed comments from Nancy Pelosi prompted a surge in optimism overnight. The House speaker suggested if a deal could be struck before the weekend there was still time to pass a bill before the election. While there is still some gap between Senate Republicans and Democrats Pelosi and Treasury Secretary Mnuchin remain confident a compromise will be reached. The questions now is not a matter of “if” a fiscal stimulus bill will be passed but “when”. The Dollar index was down 0.6% testing a break below 92 and marking its lowest level since early September. The downturn could have been worse too, with the world's base currency buoyed by a steep CAD depreciation. The Canadian dollar lost half a percent after oil prices plunged 4% following an uptick in inventories and a downturn in consumption as the pandemic tightens its grip on the US economic recovery. The Great British Pound was the strongest of the majors, advancing nearly 2% amid US dollar weakness and hopes a last-minute UK/EU trade deal will be struck as talks resume. Chief EU negotiator Michael Barnier suggested a pact was within reach if both sides could come together in the true spirit of compromise. The two parties have agreed to a final round of intensive talks expected to last three weeks in a bid to resolve key sticking points and reach an agreement. With hopes a hard Brexit will be avoided Sterling surged through 1.30 and 1.31 to touch intraday highs at 1.3165. Focus remains squarely affixed to the evolving Brexit narrative with at least a partial deal prompting GBP upside into the end of the year.
- NZD/USD: 0.6580 - 0.6730 ▲
- NZD/EUR: 0.5550 - 0.5650 ▲
- GBP/NZD: 1.9580 - 1.9920 ▲
- NZD/AUD: 0.9320 - 0.9390 ▲
- NZD/CAD: 0.8620 - 0.8820 ▲