New Zealand dollar is the biggest loser of the week on a nearly empty calendar. What could have had the Kiwi taking hits across the board?
New Zealand Headlines and Economic data
- Kiwis lean on credit cards as January spend increases
- RBNZ Deputy Governor Bascand raises possibility of rate cut
Major Market Drivers for the New Zealand Dollar
As usual, global risk sentiment was likely a contributing factor to the Kiwi’s relative performance this week with the Kiwi trading higher against the safe havens versus its trading performance against the rest of the major currencies in what was arguably a risk-on environment for most of the week.
But since the Kiwi was mostly in the red over the past five days on a virtually empty calendar (and no significant reaction to New Zealand’s update on producer prices data), it’s likely that the New Zealand dollar was taking cues from its closest trading partners, Australia and China, as well as data coming out from the region.
In terms of economic data, it’s not looking too pretty in Asia as the week started out with weak cars sales from China (down -15.8% year-over-year), followed by Japan and Singapore exports suffering their biggest decline in two years, and South Korean exports falling 12% this February. The Reserve Bank of Australia’s monetary policy meeting minutes was released earlier in the weak, which showed that the RBA is getting anxious about the housing downturn. While you can’t pinpoint any of these events to direct Kiwi weakness, it can be argued that the region’s weakness will play a big part of New Zealand’s trade down the road and was priced accordingly through the course of the week.
The Kiwi did see a bounce on Tuesday, though, likely the one of two examples where global risk sentiment played a role in broad Kiwi price action. Positive vibes came after U.S. President Trump signaled that the March 1st U.S.-China trade deal deadline could be extended and possibly on broad USD weakness after the U.S. seeks a pledge from China that it will not devalue its yuan currency.
That bounce peaked at the start of Wednesday’s Asia trading session and it looks like traders return to their bearish sentiment on the Kiwi, which then picked up steam around the same time the Aussie fell after Westpac Bank changed its interest rate forecast for Australia to two rate cuts this year and a report that China will restrict Australian coal imports, likely in retaliation to Huawei 5G ban.
And the final kick lower on the week for the Kiwi was during the Asia session on Friday, when RBNZ Deputy Governor Bascand raised possibility of rate cut if bank capital requirements were increased to help New Zealand banks raise funds. Fortunately for Kiwi bulls, that was the bottom as it appears traders returned focus to global risk sentiment, which was in the “on” position during the Friday U.S. session thanks to increasing signs that a U.S.-China trade deal will get done after reports of Chinese negotiators extending their Washington visit to continue their progress made, and after China makes a commitment to buying $1.2 trillion in U.S. goods.