Unwinding RBNZ Easing Bets Fuels Kiwi's Surge

The RBNZ's MPS & subsequent press conference put a strong bid into the kiwi. New Zealand's central bank left its OCR & asset-purchase scheme settings unchanged, while delivering on its promise to unveil the design of a Funding for Lending Programme (FLP), to be rolled out within weeks. RBNZ easing bets were pared as policymakers tipped hat to the relative resilience of domestic economy (with caveats, stressing downside risks and lingering uncertainty) and moved the trough of their "unconstrained OCR track" 90bp higher. In addition, RBNZ Gov Orr used his presser to call the inevitability of negative interest rates into question, noting that "it's too early to tell" if we will see a sub-zero OCR. Numerous sell-side desks backpedalled on their expectations of a negative OCR, while local money markets no longer price such a scenario during 2021.

• The kiwi easily topped the G10 pile and NZD/USD surged to a 19-month high, briefly showing above the $0.6900 mark. AUD/NZD dipped through its 200-DMA and tested key support from Oct 30 low, but rejected that level for now. A spill-over from NZD strength bolstered AUD against other G10 currencies.
• USD struggled, lagging behind all of its G10 peers save for sterling. GBP partially corrected yesterday's rally, amid possible profit taking.
• Greenback sales allowed USD/CNH to grind lower still, as the rate hovers near cycle lows. USD/KRW printed worst levels since Jan 31, 2019, defying pressure from a bleak labour market report released out of South Korea. On the plus side, early South Korean trade figures pointed to a continued recovery in exports.
• Today's data-light calendar features a speech from ECB's Lagarde and Riksbank's Financial Stability Report. The U.S. observes the Veterans' Day holiday.