A risk-on mood prevailed, with a recovery in commodity prices driving higher equity markets. This was reflected in currency markets with most commodity currencies outperforming and safe-haven currencies underperforming but interestingly the NZD wasn’t part of this dynamic.
The Bloomberg commodity price index has rebounded 1.8% after falling 2.0% yesterday and falling through most of last week. There’s been no substantial news to drive the rally, and the same can be said for equity markets, with US markets up circa 1% and Europe up a little under that.
AUD, NOK and CAD head the leaderboard on this commodity price rally, while the NZD has weakened, again on little news. This suggests flow and trading positioning have been behind that move.
The NZD broke out of its upward channel earlier in the week and is now largely trading sideways ahead of the RBNZ’s Financial Stability Report this morning, currently around 0.6760.
NZD/USD fell 30pips yesterday afternoon and sustained that fall when a newswire published an interview with the Finance Minister. The suggestion was that the Bank had the macro-prudential tools available and could well use them, as the RBNZ would be concerned by the recent strength in the housing market. The market believes that any amping up of macro-prudential policy could provide more room for OCR cuts.
With the AUD up 0.6% to around 0.7360, NZD/AUD has fallen to 0.9185, unwinding some of the sharp gain to 0.93 late last week.
The USD continues to edge higher, rising for the sixth consecutive day on the DXY index, albeit just over 0.1% for the past 24 hours. We noted yesterday that the recent bounce off its lows has little to do with monetary policy expectations and more a reflection of traders taking a more positive stance after the currency looked oversold.
The yen has continued to weaken, with USD/JPY up 0.9% to 109.25, a nice recovery after trading as low as 105.55 a week ago. The move over the past day has nothing to do with the daily verbal “intervention” by Japanese officials and more likely reflects the risk-on mood, with the Swiss Franc also underperforming.
GBP and EUR are little changed against the USD. GBP is slightly better bid as the trade deficit wasn’t as large as expected, although the 8-year high in the deficit for the March quarter was certainly nothing to brag about.
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.