NZD/USD beaten back to below 0.6100 on paring of risk appetite

NZD/USD is pressured at the start of this week due to a stronger US dollar that is bouncing back from a number of red days following a period of accumulation at the depths of November's sell-off. At the time of writing, DXY, an index that measures the US Dollar vs. a basket of currencies is higher by 0.77% and has sent the Kiwi down to a low of 0.6087 from the day's high of 0.6169.

The catalyst for the move can be partly put down to a risk-off start to the week due to fresh COVID-19 curbs in China that have fuelled worries over the global economic outlook.

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''The Kiwi slipped overnight amid a broad paring back in global risk appetite as equities nudged lower and the USD regained some of its lost safe-haven appeal,'' analysts at ANZ Bank explained. ''There didn’t seem to be a lot behind the moves, with little data or news to digest. But we suspect we could be in for a bit of volatility in coming days, with the RBNZ MPS due tomorrow, followed by a handful of global PMI data prints, and then the Fed minutes.''

''The MPS could be the real wildcard, even if the market gets the 75bp hike analysts are looking for, and that’s because there is a very wide range of views around where the RBNZ might project the OCR to peak (currently 4.1%). This is likely to be what determines where key short-end swap rates go, and by extension and correlation, where the Kiwi goes.''

FOMC minutes eyed

For the week ahead, the Fed minutes will shed light on the FOMC's deliberations regarding the expected downshift in the pace of rate increases. ''With that said, policymakers will also emphasize that the terminal rate is likely edging higher vs prior expectations as the labor market remains overly tight. In terms of the data, we look for the mfg PMI to recede modestly, staying above the 50 level in November,'' analysts at TD Securities said.