Kiwi bounces back as US treasury yields flatten out

Daily Currency Update

NZD - New Zealand DollarAfter a lacklustre start to the week, the New Zealand dollar rebounded through trade on Tuesday, buoyed by broad US dollar weakness. The kiwi bounced between 0.7160 and 0.7190 for much of the domestic session as investors sidelined bets ahead of the upcoming US treasury yield auction. Widening yield returns have been a key driver in the recent US dollar rebound and NZD correction and markets were looking for signs that the gap would continue to grow. Instead, yields remained flat and unchanged prompting a run on the USD that allowed the New Zealand dollar to extend back above 0.72 to intraday highs at 0.7230. The domestic docket is again light on headline data with the ANZ’s commodity price report the only item of mild interest. We anticipate direction will again take its cue from the broader narrative, with gains above last week's high, harder won, as investors look for opportunities to extend the US dollar rebound. Treasury yields will again prove critical in determining short term direction. As expectations for a broadly weaker USD through the medium term begin to falter, its likely investors will look to a period of consolidation between 0.7090 and 0.7350.