Swiss franc and Japanese yen find favour as safe haven currencies. NZD rises. Markets await Yellen guidance as risk shunned

By Kymberly Martin

The USD has been broadly weaker overnight, with the ‘safe haven’ CHF the key outperformer but the EUR also making gains.

The AUD and NZD have again made an early morning rebound from lows.

The smattering of data releases overnight did not provide much direction for currency markets. Instead the market remains fixated on moves in equities, credit and oil where sentiment remains poor. Our global risk appetite index (scale 0-100%) has fallen to 18%.

The International Energy Agency’s February report, released overnight, provided little to boost sentiment toward the ailing global oil price. It lowered its estimate of global oil demand for 2016. It also stated that supply may exceed demand by an average of 1.75m barrels a day in H1. Contributing has been the increase in Iran’s supply since sanctions were recently removed and a ramp up in output from Saudi Arabia, the agency reported. After a half-hearted attempt to rally late last evening, the WTI oil price has now slumped back below US$29.0/barrel.

With generally weak sentiment prevailing overnight, it was not surprising to see the ‘safe haven’ CHF as the best performer. It has gained a further 2% versus the USD over the past 24-hours, now trading at 0.9700.

The JPY also remains in favour, as is common during turbulent times. The USD/JPY broke below 115 overnight, to now trade at 114.80, its lowest level since mid-2014. A strengthening JPY will have the Bank of Japan increasingly worried, as it is continues to scour its toolkit for ways to return inflation back to its elusive 2% target.

The AUD and NZD were also under pressure last evening as risk appetite remained subdued. However, both rebounded sharply in the early hours of this morning, a move seemingly based on positioning rather than fundamentals. From intra-night lows near 0.6570 the NZD/USD then rapidly found itself trading back up at 0.6660, the level where it currently trades. Resistance is eyed at the 200-day moving average at 0.6700.

The NZD/AUD has traded higher overnight, breaking through the 0.9400 level in the early hours of this morning. Touching intra-night highs above 0.9440 it now trades at 0.9400. Resistance will likely be faced on any approach of 0.9500.

Tonight, the NZD’s fate will likely lie with movements in the USD, as influenced by Fed Chair Yellen’s scheduled appearance before the House Financial Services Committee 

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Kymberly Martin is on the BNZ Research team. All its research is available here.