Another day, another banking crisis

Daily currency update

The New Zealand dollar recovery faltered through trade on Wednesday, sinking back below US$0.6200 amid new fears surrounding the health of the global financial system. Markets were plunged back into turmoil after Credit Suisse auditors identified and disclosed “material weaknesses” in the bank’s reporting controls. With stocks plunging, panic intensified following reports the bank’s largest Shareholder (Saudi National Bank) rejected calls to provide capital should funding needs arise. With the bank issuing a public statement of support in a bid to obtain a liquidity backstop and markets in freefall the Swiss National Bank stepped in, announcing it will provide liquidity “if necessary”. Just as confidence was beginning to recover, the shock of last week’s Silicon Valley Bank and Signature Bank collapse has investors again being thrown to the wolves. Bank stocks plunged, leading losses across key equity indices while the risk-off move has forced the NZD toward intraday lows at US$0.6170. With little of note on the day’s domestic ticket, our focus would ordinarily turn to Australian employment data and the European Central Banks’ latest policy update for direction against key major crosses. Instead, attention will likely remain affixed to unfolding developments in this latest banking crisis. We are keenly attuned to any news surrounding Credit Suisse and risks connected with other larger banking institutions with macro themes unlikely to have a significant impact until the dust settles.

Key movers

Currency markets were again thrown into turmoil as fresh concerns surrounding the health of the world financial system forced investors toward safe haven corridors. “Material Weaknesses” identified in Credit Suisse’s reporting controls and public calls for a liquidity backstop forced key equity indices lower and prompted a rush on risk assets, propping up the Japanese Yen and USD. With the focus on European banking woes, the USD was again a source of safe haven bids as the Euro gave up nearly all its latest gains plunging 1.7% and sinking below 1.0550, before finding support. With the USD and JPY buoyed, the GBP slid back below 1.21 and tested a break below 1.2025 before finding buyers. With attention squarely affixed on developments across the global financial system, macro themes will likely take a back seat in governing direction. With risk off we expect the USD and JPY to remain well bid.  

Expected ranges

• NZD/USD: 0.6120 – 0.6280 ▼
• NZD/EUR: 0.5780 – 0.5920 ▲
• GBP/NZD: 1.9280 – 1.9620 ▼
• NZD/AUD: 0.9250 – 0.9420 ▲
• NZD/CAD: 0.8480 – 0.8580 ▼