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Kiwi Extends Slump

NZD

The combination of persistent risk aversion, month-/quarter-end demand for the greenback and a spike in New Zealand's daily Covid-19 case count weighed on NZD/USD Wednesday, taking the rate to its lowest point in more than a month. Renewed domestic Covid-19 angst rendered the kiwi the worst G10 performer, as Director-General of Health Bloomfield called a jump in new infections "sobering," while market participants trimmed some RBNZ tightening wagers.

  • Covid-19 Response Min Hipkins told RNZ this morning that officials expect "a smaller number of cases" today. The daily case count rose to 45 on Wednesday from just 8 recorded on Tuesday.
  • NZD/USD 1-week implied volatility surged Wednesday and has extended that upswing this morning (last sits at 11.46%). The move occurs just one week before the RBNZ are due to deliver their monetary policy decision.
  • The RBNZ announced public consultation on "how we should perform our role as steward of money and cash, and how we should assess the case for central bank money in a digital form alongside cash."
  • On the data front, building permits rose 3.8% M/M in August after a 2.2% increase recorded in July. Focus now turns to final ANZ Business Confidence, due later today.
  • NZD/USD sits at $0.6872 as we type, little changed on the day. Bears set their sights on Aug 20 low of $0.6805, a key layer of support. Bulls need a rebound above Sep 23 high of $0.7093 to get some reprieve.
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