Kiwi sinks toward bottom of recent range as risk sentiment sours

Daily Currency Update

NZD - New Zealand Dollar

The New Zealand dollar tracked lower through trade on Tuesday amid a souring in demand for risk. Equities shifted lower and the S&P 500 marked its first daily depreciation in 9 days, while risk correlated currencies bore the brunt of currency market volatility as the NZD and AUD lead losses. There appears no obvious catalyst for the sudden shift in risk sentiment, and instead our attentions shift to China as a possible marker driving direction. Rising concern surrounding Chinese growth prospects have escalated through the last 6 weeks as ongoing lockdowns and Covid restrictions continue to cripple domestic economic activity and derail the recovery of the global supply chain. Add to this persistent uncertainty surrounding the health of the Chinese property market and the outlook is becoming ever bleaker. Evergrande is due to pay another $150million bond coupon payment today as another of its 30-day extensions expires. Failure to meet the revised deadline has sparked fears the troubled property sector could spill over into other financial markets. As New Zealand grapples with its own Covid rebound, further uncertainty in China could see the Kiwi give up the October recovery and push toward resistance at 0.7220.