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NZD emboldened by rising commodity prices and monetary policy repricing

Tuesday 1 March, 2022

Daily Currency Update

The New Zealand dollar outperformed the majority of major counterparts through trade on Monday rallying on the heels of elevated commodity prices and a broader monetary policy repricing. A risk off tone forced the NZD toward intraday lows below 0.6660 through the early part of the domestic session as investors absorbed events of the weekend, digesting the impact of fresh sanctions. Having tracked sideways through local trade the NZD found support and momentum overnight, advancing back through 0.67 and toward intraday highs at 0.6780. Commodities maintained their upside bias as investors looked to pare back expectations for monetary policy tightening, scaling back Fed rate hike bets. While risk demand continues to drive near term direction, a broader correction in US monetary policy expectations could help propel the NZD higher and prompt a break beyond recent support and resistance handles. Our attentions remain affixed to developments in Eastern Europe and the subsequent fallout/impact on global financial markets.

Key Movers

Developments in Ukraine and Russia continue to dominate direction, driving investors toward haven assets and commodity currencies. The Yen and CHF continue to find support, leading gains across majors since the outbreak of war last week, while commodity currencies follow closely behind, buoyed by the impact of war on already elevated commodity prices. The AUD, NZD and CAD have fought off a broader risk off downturn, emboldened by the uptick across key commodities and a broader correction in monetary policy tightening expectations. The USD gave up early gains, trending lower despite a softer Euro and GBP. A correction in 10 year and 2 year US treasury yields has weighed on the USD as traders pare expectations for Fed rate hikes. Markets are now only pricing 5 rate hikes this year as the Fed tries to battle rising supply side inflationary pressures and the risks of recession. With little of note on the macroeconomic ticket our attentions remain with developments in Ukraine.

Expected Ranges

  • NZD/USD: 0.6620 - 0.6830 ▲
  • NZD/EUR: 0.5950 - 0.6120 ▲
  • GBP/NZD: 1.9720 - 2.0050 ▼
  • NZD/AUD: 0.9280 - 0.9350 ▼
  • NZD/CAD: 0.8480 - 0.8620 ▲