New Zealand Dollar Sinks

Currency markets ranged overnight, with a slight fall in US yields prompting the US dollar index to retreat by 0.19% to 91.75. In keeping with recent trading patterns, the easing of Asian equity markets has seen the index recoup nearly all of the overnight losses, leaving the index drifting in the middle of its one-week range.

The primary mover in Asia today has been the New Zealand dollar. The government has announced some quite firm new measures to control New Zealand’s rampant property market. That has caused NZD/USD to fall by 1.05% today to 0.7085. Both the AUD/USD and NZD/USD have had persistent downside risks in recent times, and NZD/USD has now fallen through critical support at 0.7100. A daily close below 0.7100 targets more losses to 0.6900 in the sessions ahead.

Severe flooding in New South Wales and Queensland, and a flailing kiwi, have combined to drag to AUD/USD 0.65% lower to 0.7700, another important support level. It now risks further losses to 0.7600 and possibly as far as 0.7400 ahead. The technical picture has been screaming that the Antipodeans were vulnerable for two weeks now, and it appears we are on the verge of just that. A rise in US yields in the coming days will set the scene for material moves lower.

With the major currencies drifting overnight in directionless trading, movements in Asian regional currencies remain modest as well. Regional Asia markets have edged lower versus the US dollar today by between 0.10% and 0.20%. The Indian rupee continues to surprise by holding firm, aided by falling oil imports. Selling pressures may emerge, though, if their Covid-19 resurgence intensifies. A sharp rise in US yields leaves the rupee, Indonesian rupiah, and Philippine peso the most vulnerable of the region’s currencies.

The Fed will be in the spotlight today, as Fed Chairman Powell and Treasury Secretary Yellen will testify before a House committee. Four Fed governors will deliver speeches as well. Perhaps we’ll be treated to an interest rate tidbit during the day.

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