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China Repo Rates Diverge On Friday

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NZDUSD Extends Decline To Fresh 2021 Lows, Room For Weakness To Extend

  • NZDUSD has now fallen for a seventh consecutive trading session and despite the RBNZ normalising monetary policy, there appears technical potential for the weakness to significantly extend.
  • Fresh lows for 2021 were made today as the pair broke the August lows at 0.6805. Support appears scant below this level and begs the question of whether we are set for a period of prolonged weakness. The most obvious downside target resides at the November 2020 lows just below the 0.66 mark, around 3% lower.
  • Additionally, AUDNZD is re-approaching the month’s highs despite Friday’s retracement lower. A break back above 1.05 would set the focus firmly on the 2021 downtrend, currently intersecting around 1.0540 of which a break would bolster the bullish case for an initial test of the October highs at 1.0612.
  • The RBNZ sees neutral interest rates at "around 2%" and monetary policy will have a restrictive impact on the economy when the bank raises them above this level late next year on current projections, according to outgoing RBNZ Deputy Governor Geoff Bascand.
  • He told MNI the RBNZ had pondered a higher 50bp increase last week but believed that a 25bps rise in concert with forward guidance on the path forward gave the market a clear view of the bank's outlook.