By Kymberly Martin
The NZD/USD appreciated steadily on Friday afternoon, consolidating it gains into the weekend. However, it has opened lower this morning, along with other ‘commodity-linked’ currencies.
Protracted negotiations in Doha over the weekend, between sixteen oil producing nations, ended without any agreements. No supply limits have been arranged.
‘Oil-linked’ currencies, such as the CAD are feeling the brunt of these early-morning headlines as markets open for the week. From 1.2820 at the end of last week, the USD/CAD now sits around 1.2950.
Some toll has also been taken on the AUD and NZD. The AUD/USD had consolidated around 0.7720 on Friday evening. It had been supported on Friday afternoon by an array of Chinese data releases that failed to provide any nasty surprises. However, this morning the AUD/USD has opened lower, and now trades around 0.7620.
So far, the impact on the NZD/USD has been less harsh. It ended the week at 0.6920 but has opened a bit lower, trading at 0.6880 currently.
The next test for the NZD/USD will be the release of NZ Q1 CPI, due this morning. We expect a slightly below consensus outcome. If delivered, this could put some downward pressure on the NZD/USD as the market brings forward expectations for further RBNZ rate cuts.
The JPY strengthened again on Friday night. The USD/JPY ended the week around 108.80. The JPY has also benefitted from the more subdued mood this morning. The USD/JPY now sits around 108.20, its early-April lows of 107.60 again in view.
CFTC data released at the end of last week showed that speculative long positions in JPY had become even more extreme, moving from 60.1k to 66.2k.
The strengthening of the JPY is no doubt causing authorities some angst. Still, IMF head, Lagarde, made clear the IMF’s views on Friday saying; “As far as Japan is concerned, you know we have fairly robust criteria under which intervention is legitimate, and that clearly can happen in the case, and only in the case, where very disruptive volatility must be avoided.”
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Kymberly Martin is on the BNZ Research team. All its research is available here.
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