Kiwi tests the lower end of recent range amid commodity softness and higher USD
Wednesday 16 June, 2021
Daily Currency UpdateNZD - New Zealand DollarThe New Zealand dollar was one of the worst performers through trade on Tuesday, testing the lower end of ranges between 0.71 and 0.7315 as a risk-off mood enveloped markets and the USD edged higher. Falls across key commodities and uncertainty in the lead up to the FOMC policy meeting dampened demand for risk assets and forced the NZD toward intraday lows at 0.7120. Investors seemed reluctant to extend positions and the NZD remains engulfed in a near term downtrend, struggling to regain the momentum that saw it test highs near 0.7315 just last month. Our attentions turn to the Fed meeting and press conference tonight, ahead of all important domestic GDP data on Thursday. Investors are keenly attuned to any sign the FOMC has begun discussing the tapering of bond purchases while revising its expectations for interest rates. A hawkish Fed could force the NZD below supports.
Key MoversThe US dollar crept higher through trade on Tuesday amid a more cautious backdrop and increased demand for haven assets. Risk aversion has allowed the CHF and JPY to outperform this week, while the euro also found support creeping higher. Commodity currencies are the days big losers, with the CAD following the AUD and NZD lower despite an uptick in oil prices. Brent Crude Oil prices rose 1% on the day, touching their highest level in two years at 73.60 a barrel. With supply constrained and demand increasing, there is scope to suggest oil prices will continue to rise, with some analysts suggesting $100 a barrel is not out of the realm of possibility. Our attentions turn now to the FOMC meeting. While we expect the Fed will maintain the current policy platform, there is a growing expectation policymakers will at least begin the discussion of tapering bond purchases while bringing forward interest rate expectations. We are keenly attuned to the Fed’s dot plot as a key market of possible interest change. Despite the optimism in some circles, we anticipate the Fed will maintain its current rhetoric and at best offer flimsy guidance on the conditions required to prompt a change in policy.
- NZD/USD: 0.7080 - 0.7220 ▼
- NZD/EUR: 0.5820 - 0.5920 ▼
- GBP/NZD: 1.9605 - 1.9840 ▲
- NZD/AUD: 0.9250 - 0.9310 ▼
- NZD/CAD: 0.8630 - 0.8720 ▼