NZD Unwinds Some Recent Outperformance, As RBNZ Comes Into View

The main theme in G10 FX markets in the first part of Monday trade has been the retracement in NZD. Trends have been relatively subdued elsewhere. The BBDXY is little changed, last near 1242.7.

• NZD/USD sits just above session lows, last near 0.6170 (earlier lows at 0.6163). This is around 0.45% weaker versus end levels from NY last Friday.
• A pullback wasn't unexpected given the size of the move last week, and as we head into the RBNZ rate decision later this week traders are understandably cautious. Also note, leveraged kiwi longs now sit at the highest since August 2023.
• Offshore demand post last week's chunky onshore debt auction may have dissipated as well.
• AUD/USD has been dragged down a little by NZD, but is only marginally weaker, last near 0.6555. The AUD/NZD cross is back to 1.0625/30, after making fresh lows last week to 1.0570.
• Weakness in iron ore prices has impacted AUD, while HK and China equities are tracking lower at this stage.
• JPY has outperformed at the margins, but remains well within recent ranges, last near 150.50.
• US yields are slightly softer to start the week, down around 2bps across the benchmarks. This may be aiding yen performance on a cross basis.
• Looking ahead, there are US new home sales for January. The ECB’s Lagarde participates in a plenary debate and BoE’s Pill and Breeden also speak.