Home Daily Commentaries NZD supports at 0.71 falter as markets adopt a cautious tone

NZD supports at 0.71 falter as markets adopt a cautious tone

Daily Currency Update

NZD - New Zealand Dollar

The New Zealand dollar fell back below 0.71 US cents on Tuesday, dragged lower by a shift in risk sentiment and broader global forces. There is no obvious catalyst for the shift in risk demand, yet investors clearly seemed intent on adopting a measured and cautious approach in returning from the Labor Day long weekend. Having touched intraday highs at 0.7150 the NZD fell steadily overnight giving up 0.71 to touch lows at 0.7090. Suggestions 0.71 could act as a key handle for support appear premature, and the overnight move highlights just how vulnerable the NZD is to broader global drivers. We expect markets are merely consolidating positions and absorbing profits following the blistering recovery off the mid-August low. In the absence of another risk off correction, the NZD should remain well bid through the weeks and months ahead. Despite the sell off, the NZD punched back through 0.96 against the AUD while eyeing a break above 0.90 against the CAD.

Our attentions turn today to the Bank of Canada and Fed Member Williams for more central bank speak. With the BoC expected to toe the line, we are keenly attuned to any insight from Williams as to when the Fed will begin a program of tapering.

Key Movers

The US dollar tracked higher through Tuesday, extending Monday’s recovery amid a broader risk off vibe. The dollar index advanced four tenths of a percent as the world’s base currency shifted upward against most major counterparts, particularly commodity led currencies. The CAD, AUD and NZD all fell steeply overnight, with the CAD notably the worst performer among major units, giving up almost a full 1% leading into today's Bank of Canada policy update. There appears little catalyst for the shift in risk demand. Given the pace and scale of the risk on recovery through the last fortnight, it appears investors are merely adopting a more measured and cautious approach through the start of the week, consolidating positions.

With last week's risk events behind us, our attentions remain affixed to shifts in broader market sentiment and changing global drivers. We expect as vaccination rates improve, and the global growth outlook recovers a broadly positive sentiment base should help cap USD gains, yet acknowledge ongoing supply constraints, rising inflation pressures and consistent pandemic driven uncertainty leave the door open to another risk off correction.

Expected Ranges

  • NZD/USD: 0.7050 - 0.7150 ▲
  • NZD/EUR: 0.5970 - 0.6030 ▲
  • GBP/NZD: 1.9280 - 1.9530 ▼
  • NZD/AUD: 0.9550 - 0.9650 ▲
  • NZD/CAD: 0.8920 - 0.9020 ▲