The NZD underperformed on Friday, alongside other commodity currencies. Global rates and US equities showed modest falls amidst a slight risk-off tone.
The USD came under some downward pressure Friday afternoon as reports surfaced that investigators into possible Russian interference in the US presidential election had subpoenaed Trump’s election campaign for documents. This gave a lift to the NZD to around 0.6880 but it was all downhill from there, including another lurch down near the UK open, taking it through the year-to -date low of 0.6818. With key technical support broken, it wasn’t until the 0.6780 mark that the NZD found some fresh support, a level not seen since June 2016. It then clawed back up and closed the week at 0.6816, still the weakest performer for the day.
There was no NZ specific news to explain the move. If anything, the PMI reading early in the session showed solid manufacturing activity in October amidst the period of uncertainty around the government formation. CFTC data through to last Tuesday showed that net speculative shorts continued to be extended, to their highest level since mid-May. Going by the NZD’s underperformance last week, those short positions probably extended further.
Other commodity currencies didn’t fare that well either, with the AUD, CAD and NOK all underperforming, suggesting some global macro theme in play – perhaps concern about the outlook for China or global growth, and potentially reduced demand for commodities. However, that’s not a convincing explanation as emerging market currencies (on the JP Morgan index) gained for the second consecutive day.
The NZD’s underperformance saw it down on all the key crosses we follow, with NZD/AUD softening a touch to 0.9010. Fresh lows were seen for NZD/EUR and NZD/GBP closing the week around 0.5780 and 0.5160 respectively. JPY was the best performing major on the risk-off tone, seeing NZD/JPY down a chunky 1.4% for the session to 76.3.
It seemed like a flow-driven market, given the light newsflow. The only data worth mentioning was strong US housing starts and permits, but they didn’t prevent the USD indices falling for the day, with the TWI majors index down 0.2%, continuing to show a tendency to fall through November to date.
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