Better risk appetite sees USD trade lower and NZD advance; markets looking to US job reports for directional guidance

By Jason Wong

There have been only modest changes in currencies, following the lively session on Friday, in the aftermath of the Jackson Hole symposium.

It could well be a quiet week as the market awaits the next big hit on the economic calendar, Friday night’s US employment report.

The USD is flat and all major currencies we closely follow have shown gains/losses within 0.3%. The NZD has nudged up 0.3% to 0.7260. Higher risk appetite overnight, as evident in the 4% fall in the VIX index, has helped support the NZD and AUD, the latter rising by 0.2% to 0.7580.

The NZD currently sits within 2% of our short-term fair value estimate of circa 0.71.

The RBNZ will be happy that Fischer’s comments knocked more than a cent off its value, but there is still much to be liked about the currency amidst a strong recovery in dairy prices and, on the RBNZ’s own estimates, expectations for tightening capacity pressures.

There’s little to say about other currencies, with the EUR, GBP and JPY all currently trading within 0.2% of Friday’s NY close, with very little volatility over the trading day.  If anything, there’s the hint of the USD losing some ground early this morning, but it’s not material.

While there are a few second-tier economic releases over the day ahead, they’re unlikely to have much market impact.

Get our daily currency email by signing up here:

BNZ Markets research is available here.