Outperforms On China Equity Bid & NZGB-Related Flow

China equity sensitivity and strong demand at the latest long end NZGB syndication (which is usually dominated by offshore investors) support NZD, leaving the kiwi atop the G10 FX pile.

• The recent evolution of expectations surrounding the RBNZ have supported the kiwi in recent weeks.
• We have previously flagged that NZD longs have started to build (based on CFTC data), albeit not to a meaningfully prohibitive level.
• NZD/USD trades at $0.6186, off bests of $0.6198. Initial resistance at $0.6206, the Jan 16 high.
• AUD/NZD trades at NZD1.0605, after a shallow look below the figure. Bears look to the Feb low (NZD1.0586) as the next target.
• Shifting relative monetary policy expectations (evidenced by the 2-Year AU/NZ swap spread) have also helped this cross lower year-to-date.
• However, we note that some recent client discussions have flagged less conviction when it comes to the path for RBA policy, with questions evident re: the likelihood of cuts later in ’24.
• Elsewhere, our policy team’s conversations with RBA staffers suggested that recent soft data has iced the idea of further rate hikes, but uncertainty - particularly on future productivity growth - could still see the Bank leave the cash rate steady at 4.35% over 2024.