NZD marks new year to date lows as Omicron prompts risk off move

Daily Currency Update

The New Zealand dollar underperformed through trade on Monday, continuing Friday’s risk off downturn and marking new year to date lows. The emergence of Omicron as a variant of concern prompted a risk off run that saw the NZD test August lows at 0.6805 and despite a broader improvement in risk sentiment on Monday the NZD broke 0.68 US cents marking fresh lows at 0.6788. Having quickly bounced off the new low 0.68 remains a key marker and technical support handle as focus and attention remain squarely affixed to the evolution of the Omicron variant. Early reports appear encouraging, but it is far to soon to know whether or not this new strain will prove more virulent, contagious and vaccine resistant. Having eyed 0.67 as a potential bottom to this resent NZD downturn a worst case Covid scenario, where in omicron envelops the global economy in another wave of infections could see that sell off extend toward 0.65. We are keenly attuned to any development or update on the status of the latest Covid 19 mutation and expect heightened volatility over the coming weeks as investors and markets place bets on its expected impact.