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NZD continues to plumb new depths marking new 2-year lows

Wednesday 4 May, 2022

Daily Currency Update

The New Zealand dollar continues to trend in one direction marking a new 2-year low yesterday and seemingly poise to break below 0.64 US cents. Persistent USD support, an elevated level of uncertainty that has crippled risk sentiment and underperformance across a basket of key domestic commodities continue to weigh on the NZD, prompting losses not just against the USD but key major counterparts. The NZD slipped below 0.9055 against the AUD for the first time since 2020 and found a new 4-year low touching 0.9040 before finding some support. The RBA’s decision to join the global monetary policy tightening cycle coupled with sustained strength across Australia’s key exports has forced investors to drive the NZD lower in recent months. With little of note on today’s ticket our attentions turn to US labour market data and the all-important FOMC policy meeting. We expect markets will tread water and maintain a narrow handle leading into the meeting. With a 50-point hike priced in, the scale and pace of further tightening will be key in governing near term NZD direction.

Key Movers

Price action across majors was largely contained through trade on Tuesday with the AUD the only real outlier, enjoying gains against all major counterparts. In the context of recent volatility, investors appeared content in squaring positions and preparing for the all-important FOMC meeting and press conference. The recent surge in bond prices is evidence of the market's lofty expectations and with a 50-basis point hike fully priced in we are keenly attuned to the commentary surrounding any policy change. Having enjoyed a period of sustained support, near term USD direction depends heavily on how quickly and how far the Fed intends to increase the underlying fed funds rate. With the US yields elevated, a miss in the context of market expectations could allow for a broader USD correction while a hawkish outlook will surely consolidate recent gains and amplify pressures felt across other major units.

Expected Ranges

  • NZD/USD: 0.6380 - 0.6520 ▼
  • NZD/EUR: 0.6080 - 0.6150 ▼
  • GBP/NZD: 1.9350 - 1.9530 ▼
  • NZD/AUD: 0.9040 - 0.9140 ▼
  • NZD/CAD: 0.8220 - 0.8320 ▼