The NZD has been one of the weakest performers over a period with little economic news and fairly modest currency movements.
The CAD heads the leaderboard, with WTI oil prices rising to their highest level since November and are currently up 3.8% to blast through the $42.50 level.
Traders took a more positive view on a day with lots of moving parts – less weight was put on the news of the end of a Kuwaiti strike and higher crude oil stocks and more weight on lower US crude production and lower distillate stocks.
Commodity prices are higher across the board, with 16 of the 19 commodities of Bloomberg’s commodity price index showing gains. This has helped support the AUD around the 0.78 handle on a day in which the USD is generally better supported. Iron ore prices have continued to strengthen, rising another 3% to just under $65 and cumulating to a massive 49% gain for the year-to-date.
The NZD is down 0.9% to 0.6980 from the previous New York close of 0.7045, which was 10 pips off the high. NZ’s export commodity prices are underperforming the general rise in global commodities.
CBA’s index of NZ export commodity prices has been on a declining trend for much of this year. There is a lag in publication so the latest rise in dairy prices has yet to be captured, but nevertheless the NZD has been pushed higher in the wave of more positive sentiment for commodities and commodity currencies, despite NZ’s terms of trade actually falling.
Improved risk appetite, rather than the commodity price factor, has pushed up our fair value estimate to just under the 0.66 mark, so the NZD still looks “over-bought”. Yesterday’s high of 0.7055 represents a fresh level of resistance as we get closer to next week’s RBNZ OCR review.
The EUR, GBP and JPY are all modestly weaker versus the USD. GBP has outperformed EUR of late as the polls on the forthcoming referendum nudge in the direction of the UK remaining in the EU.
The latest Ipsos Mori phone poll (a more reliable methodology than online polls) puts Remain at 49% and Leave on 39%. Momentum for the “Remain” camp could well increase following the UK Treasury’s in-depth report outlining the consequences of leaving the EU would be for the UK economy.
USD/JPY is up 0.5% to 109.80, its highest level in a couple of weeks. Anticipation of the BoJ’s next policy move next week grows. There are two schools of thought, one being that the BoJ needs to introduce more drastic measures to achieve its inflation target and one camp suggesting that the limits of monetary policy have effectively been reached.
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.