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Global Commodity Prices Driving Kiwi

NZD

NZD/USD was pressured last week, down ~1.5%, dealing in a 1.5 cent range through the week. The table below presents levels of correlations between NZD and key macro drivers (note the yield differential reflects swap rates).

  • Global commodities prices were the dominant macro driver in NZD in recent dealing, agriculture prices and milk futures also weighed on the NZD.
  • Over the longer term global commodities and agriculture continue to be the main driver in NZD. Correlations with Milk Futures and Global equities have risen in recent dealing.
  • Over both the short and long term correlations with rate differentials have weakened over recent sessions.

Fig 1: NZD/USD Correlation with Global Macro Drivers:

NZD Correlations

1wk1mth
2yr yield differential0.01-0.10
5yr yield differential0.21-0.32
10yr yield differential0.32-0.27
Global commodity prices0.850.88
Agriculture0.610.78
Milk Futures0.590.88
Global equities 0.440.74
US VIX index-0.31-0.32

Source:MNI/Bloomberg

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