Daily Currency Update
NZD - New Zealand DollarThe New Zealand dollar outperformed through trade on Tuesday, bolstered by an extension in Monday’s risk correction. Expectations the Fed will refrain from tapering bond purchases and normalising monetary policy in the face of the delta variant coupled with reports China enjoyed another day of low level community transmission helped fuel demand across commodity markets, equities and risk assets. China’s ability to wrest control of this latest delta outbreak has fostered hopes the world’s second-largest economy will enjoy a swift recovery. Added Central Bank support and early signs of increased domestic activity have helped reignite demand for key commodities. Oil extended its recovery, clearing $71 a barrel, while iron ore advanced a further 2%, marking a 15% rebound off lows hit last week. The NZD advanced a further 0.6% overnight, pushing through 0.69 and 0.6950. Added support came following comments from RBNZ assistant governor Hawkesby. While offering little we didn’t already know, they helped reinforce the bank's position on Monetary policy, affirming its commitment to normalisation through the months ahead. Expectation’s policymakers will embark on a path to neutral from October were bolstered, adding a floor beneath the NZD and helping lift the currency to intraday highs at 0.6966. With little of note on today’s agenda, our attentions remain with the global risk narrative.
Key Movers
Commodity currencies outperformed their major counterparts on Tuesday, advancing against the USD and key crosses as other major units showed little to excite investors. The yen tracked marginally higher against the USD, while the GBP and EUR enjoyed modest gains, touching 1.3745 and 1.1765 respectively. The dollar index moved lower, giving up two tenths of a percent, and remains vulnerable to a further correction if markets sustain a shift toward positive sentiment. Having latched onto positive Covid news in China, there is a renewed optimism the worst may be behind us and a second global economic rebuild can begin. That said, the delta variant continues to rip through countries and areas with low vaccination rates, meaning lockdowns and reduced economic activity are likely to remain a drag on growth through the rest of 2021 and into 2022. We maintain our view that risks remain broadly skewed to the downside through the near term as shifting sentiments steer direction.
Expected Ranges
- NZD/USD: 0.6820 - 0.7020 ▲
- NZD/EUR: 0.6090 - 0.6220 ▲
- GBP/NZD: 1.9620 - 1.9930 ▼
- NZD/AUD: 0.9530 - 0.9620 ▲
- NZD/CAD: 0.8690 - 0.8820 ▲