Kiwi bounces back above 0.71 amid softer US dollar
Friday 10 September, 2021
Daily Currency Update
NZD - New Zealand Dollar
The New Zealand dollar extended back above 0.71 US cents through trade on Thursday, buoyed by a softening in US 10-year treasury yields and a firming in RBNZ rate hike expectations. Despite the market maintaining the weeks cautious tone, the USD faltered overnight as global rates fell in the wake of the ECB policy meeting. Ten-year bond yields slipped 4 basis points and investors looked to price in a 50-basis point rate hike at next months RBNZ OCR policy meeting. Analysts’ expectations for the process of monetary policy normalisation firmed this week as New Zealand appears to have successfully quashed yet another COVID-19 outbreak. A return to normal in the coming weeks should drive a swift rebound in economic activity and do little to dampen the broader recovery. Having touched intraday highs at 0.7135, the NZD edged lower into the open but held above a potentially critical support line at 0.71 cents. Having outperformed against the USD, the NZD continues to outpace commodity counterparts touching 0.9040 against the CAD and breaking through 0.9650 against the AUD.
With little of note on today’s ticket we expect a relatively quiet close to the week as our attentions remain affixed to broader global drivers of direction.
Key MoversAmid a drop across global rates the USD and euro lagged most major counterparts through trade on Thursday, while the JPY and CHF led gains as investors saw little reason to shift away from the weeks risk off vibe. The ECB offered little to spark a risk recovery driving the euro toward 1.18, before broader USD weakness helped it close nearer 1.1825. The ECB, as expected, opted to reduce the pace of their Pandemic Bond Buying Program, yet failed to confirm the scale of the reduction and were at pains to point out it is not an intention to shift purchases back to zero, but rather a “recalibration” ahead of a review in December. While offering an optimistic assessment of the economic recovery to date, the ECB continues to lag major central bank counterparts in a path to normalisation. With the current emergency bond purchase program expected to run into March and the ECB’s traditional QE Asset purchase program likely bolstered in Q2 2022 to smooth the market transition, the ECB is a long way from shifting interest rates back above zero and toward normal.
With little of note on today’s macroeconomic ticket we expect a relatively quiet close to the week.
- NZD/USD: 0.7070 - 0.7150 ▲
- NZD/EUR: 0.5980 - 0.6050 ▲
- GBP/NZD: 1.9320 - 1.9580 ▲
- NZD/AUD: 0.9580 - 0.9680 ▲
- NZD/CAD: 0.8970 - 0.9050 ▲