New Zealand Dollar Recovers as the Positives are Taken on Board
The New Zealand dollar started the new week as the G10's worst performer, however the NZD has recovered as markets take on board the currency's positive outlook.
The New Zealand dollar was the worst performer amongst the leading global currencies on Monday the 28th with residual weakness being apparent on Tuesday the 29th.
The weakness allowed the pound to New Zealand dollar exchange rate (GBPNZD) to rally off the 2.38 support zone and knock on the door of 2.42.
However, in the mid-week session the NZ dollar has moved higher alongside global equity markets and commodity prices.
Dire factory figures from China seems to be the main culprit for the NZD weakness seen at the start of the week - the latest data confirms Chinese growth is slowing down from break-neck pace and global markets are having to adjust.
Any improvement in sentiment on this front ultimately feeds back into a stronger kiwi.
External factors are proving a headache for those watching the New Zealand currency - but importantly - there are reasons to be upbeat on the domestic outlook.
Recent comments from RBNZ Governor Wheeler have been positive. The RBNZ's Governor said the economy performed better than others and while he is concerned about financial stability risks, he is also worried about soaring house prices.
"After their last rate hike, Wheeler said further easing may be necessary but between his concerns about housing, the recent increase in dairy prices and the increase in payout by Fonterra, there is less pressure on the RBNZ to lower rates," says Lien.
Latest Pound / New Zealand Dollar Exchange Rates
  | Live: 2.3113▼ -0.06%12 Month Best:2.3553 |
*Your Bank's Retail Rate
| 2.2327 - 2.242 |
**Independent Specialist | 2.279 - 2.2882 Find out why this is a better rate |
* Bank rates according to latest IMTI data.
** RationalFX dealing desk quotation.
The analyst team at New Zealand currency brokerage Tuatara Management downward pressure on the kiwi has lost some momentum for now as the currency remains in the range of .6250-.6450 for just over a month.
"It is consolidating as investors slowly cash up their bets and take some profit off the table. The key driver in the short term may be the RBNZ meeting at the end of October," say Tuatara.
Lloyds Bank have meanwhile confirmed they are bullish on the prospects of the NZ dollar moving forward and say the GBP/NZD could actually be around the best levels likely to be achieved.
Australian Dollar Finds Strength - What Levels to Watch from Here?
The Australian dollar has meanwhile broken out of a very consistent downtrend against the US dollar.
AUDUSD dipped below the US$0.70 level, it seems to just be trading sideways slightly above that level, with most of the recent trading taking place within the $0.7000 and $0.7040 band.
Against the pound sterling the Aussie (GBPAUD) is also treading a sideways platform with declines below 2.150 unlikely with strength being capped at 2.20.
“The Aussie seems to be awaiting further leads, but the odds are still skewed to it moving to the downside as strong US data or hawkish statements from Fed members are likely to help push it back below $0.70,” says Nicholson.
Concerns about the Chinese economy and speculation over when the Fed will begin to raise interest rates are likely to continue to be the dominant issues for markets.
The key Chinese data will come later in the week but today will see both US data and some Fed speakers that could impact on interest rate expectations.
Last week several FOMC participants including Fed Chair Yellen suggested that a 2015 policy rate increase remained on the cards.
Today should see a wider range of views.
Of particular interest will be the comments of New York Fed President Dudley. He is regarded as having ‘centrist’ views but is also seen as being one of the Committee members who is most influenced by financial market fluctuations.
