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NZD succumbs to global forces amid steep correction in commodity prices

Friday 20 August, 2021

Daily Currency Update

NZD - New Zealand DollarThe New Zealand dollar sell off continued through trade on Thursday, plunging through 0.6850, to mark fresh 9-month lows nearing 0.68 US cents. Broad based US dollar appreciation coupled with a sell off across commodities and a definitive risk off move, culminated in a correction across commodity currencies and risk assets. Growing concern for the global economic growth outlook saw oil prices plunge to their lowest level since May, copper slip to a four-month low and iron ore continue its steep correction, now 20% lower through August. Having touched intraday lows at 0.6810, the NZD found some support through the overnight session, edging marginally higher into this morning’s open, yet remains increasingly vulnerable amid mounting risk aversion. Global forces are clearly driving direction and as expectations for global growth are adjusted, we can anticipate ongoing downside risk through the days and weeks ahead.

Key Movers

The US dollar outperformed through trade on Thursday, extending the weeks gains through 1% and marking fresh 9 month highs. Risk aversion amid a shift in global growth expectations have fueled a run on commodities and risk assets, amplifying demand for haven currencies. The USD advanced against all major currencies, with the yen and Swiss franc, fellow safe haven counterparts, the only units not to record wholesale losses. The euro fell back through 1.17, marking new 10 month lows below 1.1670, while the GBP plunged through 1.37 and 1.3650. Commodity currencies were however the days big losers, with the CAD and Norwegian kroner (NOK) leading losses. A steep correction in oil prices, amid concerns global demand will again falter in the face of the pandemic drove both currencies lower down, 1.3% and 1.4% respectively. With little of note on today’s macroeconomic ticket our attentions remain with broader global forces and extension off the current risk off narrative. Given the speed and size of the weeks correction, a consolidation around current levels is plausible, yet risks remain skewed to the downside through the near term.

Expected Ranges

  • NZD/USD: 0.6750 - 0.6920 ▼
  • NZD/EUR: 0.5780 - 0.5920 ▼
  • GBP/NZD: 1.9850 - 2.0150 ▼
  • NZD/AUD: 0.9390 - 0.9630 ▲
  • NZD/CAD: 0.8680 - 0.8820 ▲