It was a quiet night for financial markets as liquidity dries up ahead of the holiday period. The USD is slightly weaker, led by a 1% recovery in the yen. This report pre-dates Fed Chair Yellen's speech at 7:30am where she is expected to talk about the US labour market. Following last week's press conference and previous speeches, any fresh insights are likely to be limited.
USD/JPY traded down to 116.55 this morning. The yen's strong correlation with global bond yields continues and yen strength coincides with a fall in US Treasury yields. Investors are also likely to be lightening up on short yen positions ahead of the BoJ meeting later today. The BoJ's yield curve control policy has been remarkably successful in driving the yen weaker, although timing of that policy was fortuitous, as it coincided with the early stages of a big global bond market selloff. We doubt the BoJ wants to rock the boat at this stage and make any adjustment to policy in light of the policy's success.
The stronger yen and weaker NZD over recent days has seen NZD/JPY fall steeply down to around 81.0, a more than 3% fall from last week's peak. Still, we see the cross remaining elevated for some time yet.
NZD/USD is slightly weaker from last week's close, trading close to the 0.6950 mark. Yesterday's economic releases were all positive for the NZ economy, and with a lower VIX (ie higher risk appetite), the depreciation represents another shift away from short-term fair value, which sits close to 0.73. Again, the weaker AUD likely had some spill-over effect. Australia's fiscal update showed further deterioration, but not enough to prompt the rating agencies to downgrade the sovereign rating. That could still come though if there's further deterioration after the May Budget. NZD/AUD is slightly higher around 0.9570, with the 0.96 mark proving to be an area of strong resistance.
There's not much else to report on the other majors. EUR is flat around the 1.0440 mark, while GBP is trading soft at 1.2410 ahead of tonight's key event which sees PM May questioned on Brexit in front of Parliament.
Get our daily currency email by signing up here:
Daily exchange rates
Select chart tabs
BNZ Markets research is available here.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.