NZD Worst Performer on Global FX Space Over Past 24 Hours

After taking the crown of yesterday's worst performer, a look at the wholesale spot markets shows the NZ Dollar remains in poor shape.

NZ Dollar Scuppered after RBNZ Imposes Lending Restrictions, Outlook Turns Bearish

As mentioned, the worst performing currency on the global FX space yesterday was the New Zealand dollar, which was hit hard by new lending measures introduced by Reserve Bank of New Zealand Governor Wheeler.  

"In a speech that was suppose to "Explain the role of macro-prudential policy," Wheeler announced loan to value restrictions that will limit low deposit loans to 10% of new mortgages made by banks. Low deposit or high LVR is assumed to be loans where 80% or more of the home value is mortgaged," says Kathy Lien at BK Asset Management.

The goal is to "slow house price growth" and support monetary policy.  

While the central bank is not looking to raise interest rates this year because of concerns about Australian, Chinese and global growth, today's announcement represents tightening of monetary conditions.

First time home buyers will find it much more difficult to attain financing with a deposit of less than 20% and this could affect home prices in the medium term.  

Wheeler's comment that the exchange rate is overvalued also weighed on the currency.

"NZDUSD retested 0.7930-0.7900 main support area, at the 50-days SMA, while the bias continues to be strongly bearish, but requires a clear break and stability below this support to confirm further downside," say ICN Financial Markets with regards to the near-term outlook for the New Zealand Dollar.