JPY down 5.6% as USD strengthens; NZD & AUD weighed down by Yellen's speech

By Kymberly Martin

It was a quiet start to the week given public holidays in the US and UK. The AUD and NZD trade at similar levels to yesterday morning, despite an intra-day dip.

The EUR/USD pushed higher overnight, in holiday-thinned markets. It traded down to its 200-day moving average just below 1.1100 yesterday afternoon. It then rebounded during the evening to trade just below 1.1140 currently.

Meanwhile, the JPY has extended recent losses. The USD/JPY now trades just above 111.10. The JPY has weakened 5.6% within the month, from the time when chatter of the BoJ considering currency intervention was at its loudest.

The AUD and NZD both opened lower yesterday, likely still feeling a bit of weight following Fed Chair Yellen’s assertive comments early on Saturday morning. However, both managed to find their feet early in the afternoon. Subsequently they have rebounded to trade near to the level they closed on Friday. From early afternoon lows below 0.6680 the NZD/USD now trades back at 0.6700.

Our NZD/USD fair value estimate is now 0.6630, up around one cent over the past week.  For much of this year, the actual NZD/USD has traded about 4-5% above our fair value estimate. The gap has now closed to just 1%, the smallest gap this year.  Thus, further falls in the NZD/USD might be harder to come by over the next month, following the 3.5 cent fall from its peak around 0.7050 earlier this month. There remains strong technical support at the 200-day moving average of 0.6655 ahead of the 0.6600 level.

Today the domestic focus will be the ANZ business confidence survey. The headline number will likely confirm a still solid activity outlook. However, the market may give more attention to the inflation gauges in the survey.

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