Kiwi Shrugs Off FSR & More RBNZ Speak

RBNZ matters & healthy risk appetite allowed NZD/USD to catch the wind in its sails Tuesday, which resulted in a foray above the psychological $0.7000 level. The kiwi received a boost as NZ FinMin proposed to add house prices to the RBNZ's remit, while the formal start to U.S. President-elect Biden's transition supported broader sentiment. NZD/USD pulled back from best levels, but remained afloat, finishing the day 54 pips better off.

• The RBNZ released its semi-annual Financial Stability Report this morning and judged that domestic economy "has been relatively resilient to the economic shock from the pandemic so far". The report noted that "the banking system has maintained strong buffers of capital and liquidity".
• Meanwhile, the Reserve Bank expressed its willingness to re-impose LVR restrictions from Mar 1, "at the same level they were set at prior to their removal in Apr". Final decision on the matter will be made after further consultations.
• During the subsequent press conference, Gov Orr reiterated that the MPC already takes housing into account, but will consider amending the remit. Orr added that the RBNZ never said it is going to implement a negative OCR, it only said it wants to be operationally ready for such a scenario.
• NZD/USD trades little changed at $0.6978, looking through the FSR & RBNZ speak. Tuesday's high of $0.7005 provides the initial bullish target and a break here would open up $0.7060/65, which represent the high print of Jun 6, 2018/76.4% recovery of the 2017 - 2020 slide. Bears look for a retreat under Monday's low of $0.6897, followed by Nov 17 & 18 lows of $0.6876.
• Focus moves to New Zealand's trade balance, due tomorrow, as well as Friday's ANZ Consumer Confidence.