Kiwi Whipsaws After Hawkish Hold From RBNZ, Risk Appetite Firms

The RBNZ admitted that they were on the course to tightening policy, but they chose to leave the OCR unchanged in light of the government's decision to place the whole country under strict lockdown. The NZD tanked in the initial reaction as the decision to leave policy settings on hold caught hawks off guard. The downswing was promptly retraced as the focus turned to updated projections in the MPS, in which the Committee anticipated a lift in the OCR later this year. When the dust settled, the Kiwi found itself atop the G10 scoreboard.

• New Zealand identified a couple of further Covid-19 cases linked to the current outbreak, bringing the total case count to 7. Officials said that the original case can be traced back to Australia's NSW. Some fresh clarity on the Covid-19 front appeared to lend a modicum of support to the NZD ahead of the RBNZ announcement.
• NZD/USD printed a fresh YtD trough at $0.6870 before bouncing off there. Implied volatilities faltered across the board, with the overnight tenor staging a sharp pullback to 12.09%.
• Yesterday's risk aversion evaporated, reducing demand for safe haven assets. The yen was the main laggard despite little in the way of notable headline flow out of Japan.
• Commodity-tied FX traded on a firmer footing amid an uptick in crude oil prices and wider post-RBNZ gyrations.
• USD/CNH extended losses after a marginally firmer than expected PBOC fix. China's central bank set its central USD/CNY mid-point at CNY6.4915, 15 pips shy of sell-side estimate.
• Key releases due after Asia hours include inflation data from the UK, EZ (f) & Canada. The FOMC will publish minutes from their latest monetary policy meeting, while Fed's Bullard will discuss U.S. economic outlook.