NZD/USD dives to 0.6400 area, eyes three-week lows at 0.6380
|- NZD/USD reversal from 0.6500 extends to 0.6400 nearing three-week lows at 0.6375.
- A dovish RBNZ statement and fears of a new COVID-19 wave hurt the NZD.
- Rabobank analysts see risk of a decline towards 0.6000.
The New Zealand dollar has been one of the worst-performing G-10 currencies on Wednesday, extending its reversal from Tuesday’s high at 0.6530 to session lows near 0.6400. The overall risk-off sentiment and the dovish monetary policy statement by the RBNZ have punished the kiwi.
NZD dives after RBNZ’s dovish statement
The Reserve Bank of New Zealand has kept the Official Cash Rate unchanged at 0.25% as expected, although the Bank Governor, Andrew Orr has warned about the significant challenges ahead, dampening hopes of a quick economic recovery and weighing on the risk-related New Zealand dollar.
Furthermore, the Bank’s statement has shown its commitment to increase its Quantitative Easing program if necessary, which has increased negative pressure on the kiwi.
On the other hand, investor’s fears of a second COVID-19 wave and US Government’s threat to open a new tariff rift with the European Union have deteriorated market sentiment, which has increased confidence in the safe-haven USD.
NZD/USD is risking a dip towards 0.6000 - Rabobank
On a longer-term perspective, the Rabobank FX Analysis Team warns that RBNZ monetary policy might pull the pair towards 0.6000 area, “We see the risk of a pullback to the NZD/USD 0.60 area by year-end. In view of the huge reflation trade in recent weeks, we have revised this forecast up from 0.57.”
NZD/USD key levels to watch
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