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NZD extends downturn as markets price in US Fed rate hike

Friday 12 November, 2021

Daily Currency Update

NZD - New Zealand Dollar

The New Zealand dollar gave up more ground to the US dollar through trade on Thursday, sinking below 0.7050 only to find support at 0.7010. With little of note on the domestic ticket, a broader sell off across commodity currencies dragged the Kiwi lower, extending the recent downtrend and firmly entrenching the currency within a bearish channel. A rebound across equities and an overall improvement in risk sentiment failed to spillover into currency markets and the USD extended its run higher. As we noted yesterday, markets are re-pricing fed policy expectations following Wednesday's CPI shock and with much of the RBNZ forward guidance already priced in, the correction in yield expectations and focus on Fed policy continues to drive the NZD lower. Our attentions turn now to US consumer confidence data and commentary from key Fed officials for direction into the weekly close.

Key Movers

The US dollar maintained its upward momentum through trade on Thursday, as investors continue to drive rate hike expectations following Wednesday's surprise CPI release. The dollar index extended beyond the September high marking a fresh year to date peak, as investors brush off last weeks dovish Fed commentary and instead focus on real world indicators, fully pricing in a July 2022 rate hike. As expectations for tighter monetary policy firm, the USD continued its advance against the yen, punching back through 114 and poised to extend gains toward levels not seen since Q1 2017. The euro slipped below 1.1450, while the GBP plunged below 1.34 and 1.3350. Our attentions turn now to commentary from key central bank officials. ECB Chief economist Philip Lane And New York Fed President John Williams hit the wires. We are keenly attuned to any comments from Williams in particular that suggest the Fed may be wavering in its commitment to accommodative monetary policy.

Expected Ranges

  • NZD/USD: 0.6980 - 0.7130 ▼
  • NZD/EUR: 0.6080 - 0.6160 ▼
  • GBP/NZD: 1.8970 - 1.9120 ▲
  • NZD/AUD: 0.9580 - 0.9660 ▼
  • NZD/CAD: 0.8790 - 0.8850 ▲