NZD/USD inter-markets: NZ-US 2-yr yield spread defies monetary policy divergence
|The Kiwi extends its bullish momentum into a third day this Tuesday, and now trades near four-day highs as the NZD received fresh boost from better-than expected Chinese manufacturing PMI reports.
Moreover, minor-recovery attempts seen in oil prices and higher metals’ prices also add to the bullish tone seen behind the resource-linked New Zealand dollar. The major also finds support from renewed weakness in the US dollar against its six main competitors.
Further, widening NZ-US 2-yr yield differential in favor of a stronger NZD, defy divergent monetary policy outlook between the Fed and RBNZ, and hence, drives the major towards 0.7200 levels.
The Fed is likely to signal towards a Dec Fed rate hike at its monetary policy meeting concluding tomorrow, while a RBNZ rate cut is almost certain at its policy meeting next, especially after RBNZ Governor Wheeler’s intimations that further cuts are required going forward.
Additionally, tumbling VIX futures (CBOE Volatility Index), fear gauge, indicated improved risk sentiment and further bolstered the upmove in the Kiwi.
In the day ahead, further moves in the NZD/USD pair will be continued to be driven by USD dynamics ahead of Fonterra’s fortnightly dairy auction results due to be published later in the NA session.
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