NZD maintains narrow range as markets eye US holiday and RBA

Daily Currency Update

The New Zealand dollar has started the week on a positive note, maintaining Friday’s gains and edging upward amid an extended risk on run and weaker US manufacturing data. With little of note on hand through the domestic session, our attention again turned to China and the PBoC fixing of the yuan reference rate. Policymakers set about protesting CNH softness, again setting a higher reference rate.

The move seems to have prevented further yuan weakness and helped underpin NZD supports at US$0.6100.  The NZD then extended toward US$0.6170, after a US ISM manufacturing report showed activity contracted to lows seen only in the depths of the Pandemic. The soft read prompted a downturn in US 2- and 10-year treasuries before a rebound into the daily close.

While the manufacturing sector slides deeper into contractionary territory, it comes as little surprise and the real impact on rates and the USD has been largely muted. In other news, the NZD is stronger against most crosses marking a fresh 8-year high against the Japanese yen, trading above 89 briefly through trade on Monday.

Our attention turns now to the local QSBO report, which is expected to show a lift in confidence and activity, while the RBA policy announcement dominated the antipodean docket. With the NZD recovering losses suffered through early June, today’s policy announcement will prove critical in shaping near-term NZD/AUD value.