by Raiko Shareef
NZ Dollar
The NZD joined risk assets in a move higher overnight, as fears over an escalation in Crimea proved unfounded.
Remarkably, the NZD/USD opened unchanged on Monday morning, defying the downbeat risk tone that saw AUD open about 20 points lower.
Both currencies ground higher over the day, with the NZD/USD up by 0.4% to 0.8570.
Amongst the crosses, the NZD/JPY predictably saw the largest gain as a result of the swing in risk tone, up 0.7% to 87.2.
Yesterday saw February’s Performance of Services Index released, which slowed to 53.1 from a heady 57.8 in January.
The Westpac McDermott Miller consumer confidence index also dipped in its Q1 print, to 121.1 from 120.1 in December.
These indicators continue to signal a strong domestic growth story.
Today, there is nothing on the local data calendar, but we will be watching the GlobalDairyTrade auction in the early hours of tomorrow morning.
For the NZD/USD, we see resistance at 0.8600, and support at 0.8460.
----------------------------------------------------------
To subscribe to our free daily Currency Rate Sheet and News email, enter your email address here.
----------------------------------------------------------
Majors
Some of the cautious sentiment lifted from markets overnight, seeing the JPY and the CHF weaker, and a host of risk currencies stronger.
Major equity markets saw gains, with the S&P500 up by 0.9% and the Euro Stoxx 50 up by 1.5%.
The lack of any military or diplomatic escalation following Crimea’s vote in favour of secession improved market sentiment. The US and the EU named a small number of Russian individuals against whom they have imposed travel bans and asset freezes, which the market fully expected. The measures were widely seen to have little impact on Russia in any economic sense. While European and American officials have warned that further sanctions remain an option, it remains unclear what would trigger them, short of Russia formally absorbing Crimea as part of its own territory.
As a result, the JPY unwound some of the strength it saw over the end of last week, with the USD/JPY depreciating by 0.3% to 101.60. Emerging market currencies were generally stronger, led by the RUB, which gained 1.0%.
Separately, the CNY depreciated to an 11-month low in its first day with a +/-2% trading band. The USD/CNY weakened by 0.5% on the day to 6.18. We expect volatility to continue in the near-term, as the People’s Bank of China tries to dissuade speculative investment that would benefit from steady CNY appreciation. However, we continue to see the CNY strengthening in a structural sense, appreciating to 5.95 by year-end.
The AUD was the strongest performing major currency yesterday, with a move higher kick-started by Westpac announcing that it no longer expects an RBA rate cut this year. The AUD/USD gained 0.7% over the session to begin this morning just shy of the 0.91 level.
Today sees the release of the RBA minutes from its March policy meeting, where analysts will be watching closely for any further discouraging noises about the “high” level of the AUD. Overnight, Germany’s ZEW survey and US housing data may attract some attention.
Other news:
* US Empire manufacturing survey printed at 5.61 vs 6.50 exp.
* US industrial production printed at 0.6% m/m vs 0.2% exp.
* US NAHB housing market index printed at 47 vs 50 exp.
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.