Kiwi outperforms all majors, recouping last weeks unexplained downturn.

Daily Currency Update

The New Zealand dollar outperformed through trade on Monday, outpacing all major counterparts amid renewed demand for risk and broader USD weakness. Having tested lows at 0.7150 last week the NZD surged back through 0.72 to mark intraday highs at 0.7220. While the currency has struggled to break outside a narrow trading handle between 0.71 and 0.73 we retain our bullish expectations. The months early inflation concerns appear to have eased allowing a renewed appetite for risk, while New Zealand’s economic recovery remains ahead of schedule, in fact, fair value estimates suggest the currency continues to lag fundamentals and the macroeconomic backdrop. We continue to watch resistance at 0.7315 with a break above this handle potentially signaling a move toward year-to-date highs above 0.74. Our attentions remain with tomorrow’s RBNZ monetary policy and rate statements. While we expect few surprises there is scope to suggest policy makers may adopt a more optimistic tone and outline a plan to normalise monetary policy.