The USD moved higher after non-farm payrolls, in tandem with the increase in Treasury yields off the intraday lows, and ended the day modestly stronger against most of the G10 currencies. The Bloomberg DXY was up 0.2% on Friday and near its highest levels for 2018. Besides the increase in interest rate differentials, in favour of the USD, short covering among speculative investors has undoubtedly played a key role in the recent USD resurgence. CFTC data released Friday showed a near 30% reduction in the aggregate USD short position among speculative investors for the week ended Tuesday.
The NZD was one of the underperformers in FX markets on Friday, although this was mostly a reflection of its steady decline from mid-afternoon NZ time (from a high of 0.7053) to around 0.7010 before payrolls was released. The NZD hit a low of 0.6994 after payrolls, before recovering to end the week at 0.7020. An increase in risk appetite during the US session (as reflected in higher equities and the VIX falling below 15) helped support the NZD post-payrolls. The focus for the NZD this week is firmly on the RBNZ meeting on Thursday morning, the first under new Governor Adrian Orr. We don’t expect much change from the February MPS – see our RBNZ MPS Preview sent on Friday.
US equity markets ended the week on a strong note (S&P500 +1.3%, NASDAQ +1.7%), with the market seemingly reassured by the modest increase in wage growth in April. In a television interview, Warren Buffett said he had bought an additional 75 million shares in Apple in the first quarter (which would have cost more than $10b), which helped Apple shares to a new high and contributed to the outperformance of the NASDAQ.
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