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NZD set to be worst performing major currency in June

Wednesday 30 June, 2021

Daily Currency Update

NZD - New Zealand DollarThe New Zealand dollar recovery stalled through trade on Tuesday, despite a largely risk-on backdrop and uptick in commodities. Equities rallied to near record highs, while the Bloomberg commodity index marked a 5th consecutive daily appreciation, yet the NZD drifted back toward 0.70 US cents, unable to regain the ascendancy it held prior to the mid-June Fed update. Set to be the worst performing major unit in June, the NZD appears to be moving against normal drivers. Risk demand continues to strengthen as bonds, equities and commodities enjoy sustained upside, yet investors seem reluctant to force a spillover into currency markets. Fundamentally, the NZD is grossly undervalued, and we anticipate the currency will recoup recent losses and advance toward 0.74 US cents come years end. However, the emergence of the COVID-19 Delta strain poses a risk to this outlook and is perhaps the reason behind the NZD’s current underperformance. We continue to monitor the reflation narrative and the ever-evolving pandemic.

Key Movers

Despite the risk-on backdrop, haven currencies outperformed through trade on Tuesday, as the Japanese yen closed the day as the top performer when valued against major counterparts. Despite giving up ground to the JPY, the USD enjoyed broad based gains, thanks to a dip in the EUR and the GBP. The single currency fell below 1.19 while GBP struggled to hold onto moves approaching 1.38 as the correlation between currency markets and other financial assets widens. Investors appear concerned the emergence and spread of the Delta variant could derail the global economic recovery, amplifying demand for haven assets and driving commodity and growth linked currencies lower. Our attentions remain with the evolving pandemic narrative, while US non-farm payroll numbers Friday headline the macroeconomic docket.

Expected Ranges

  • NZD/USD: 0.6950 - 0.7100 ▼
  • NZD/EUR: 0.5830 - 0.5930 ▼
  • GBP/NZD: 1.9605 - 1.9950 ▲
  • NZD/AUD: 0.9280 - 0.9330 ▼
  • NZD/CAD: 0.8590 - 0.8720 ▼