Home Daily Commentaries NZD retreats amid emerging market risk aversion

NZD retreats amid emerging market risk aversion

Matt Richardson
Written by
Matt Richardson

Matt Richardson

OFXpert

Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange.

| Wednesday 5 June, 2024

Daily Currency Update

The New Zealand dollar push toward and through US$0.62 faltered through trade on Tuesday amid elevated risk aversion. Reports China inventories have increased weighed on investors, elevating concerns surrounding the state of the Chinese economy and driving key commodity prices lower. The NZD drifted lower through the latter half of the local session and continued to track lower overnight as haven assets demanded attention following elevated emerging risk aversion. A decline in India's equity markets following news Prime minster Modi’s party failed to win enough seats in to form a majority government surprised markets as exit polls suggested the incumbent PM would expand his majority. The result will make it harder for Modi to accelerate market-friendly reforms. Risk aversion in emerging markets is never good for the Antipodean majors and the NZD tracked toward overnight lows at US$0.6160 before finding support and settling near US$0.6180 leading into this morning’s open.

Key Movers

The US dollar is broadly stronger this morning elevated by heightened risk aversion and a decline in commodity prices. The USD advanced against most majors except the JPY and CHF as market demand for haven assets surged following a surprise election result in India and ongoing China economic concerns. The DXY index climbed despite a further decline in US treasury yields following a softer than expected JOLTS jobs report. Job openings fell to their lowest level in 3 years elevating calls for the Fed to cut rates amid an underperforming labour market. The likelihood of a September rate cut now sits at 75% up 5% on yesterday. With the US treasury yields on the back foot, the Japanese yen was the day's best performer. Buoyed by the decline in US rates the JPY found added support following reports the Bank of Japan will likely reduce bond purchases at its next policy meeting.
Our attention now turns to a stacked macro docket led by EU, US and UK PMI data, US services ISM data, China Caixin manufacturing PMI and a Bank of Canada policy meeting.

Expected Ranges

  • NZD/USD: 0.6100 - 0.6200 ▼
  • NZD/EUR: 0.5620 - 0.5720 ▲
  • GBP/NZD: 2.0600 - 2.0800 ▼
  • NZD/AUD: 0.9220 - 0.9320 ▲
  • NZD/CAD: 0.8340 - 0.8520 ▲

Written by

Matt Richardson

OFXpert

As a Senior Corporate Client Manager, Matt provides expertise in currency risk management to his clients, drawing from his 14 years of experience in foreign exchange. Matt has clients who he has been working with for over a decade, a testament to his knowledge and dedication in the field. Matt is also a regular contributor on Ausbiz, offering clear and precise updates on currency market trends, showcasing his ability to interpret complex financial data into actionable insights.

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