NZD/USD held back in flight into the US dollar ahead of RBNZ

NZD/USD is trading at 0.6950 as North America draws to a close. The pair moved from a low of 0.6947 to a high of 0.7013. Volatility is likely to pick up further as we move on towards the Reserve Bank of New Zealand. 

''We expect a 25bp hike, but the market has gotten itself all tied up in knots expecting a super-hawkish tone,'' analysts at ANZ Bank said. ''Yet in reality, downside risks are emerging and higher swap/mortgage rates have already done the heavy lifting. Could the Kiwi have had its best days for 2021? Maybe.''

The markets are of the mind that record low-interest rates are now behind us. Analysts at Westpac, for instance, argue that ''a period of more normal rates beckons. And as the RBNZ attempts to cool the hot New Zealand economy, the challenge will be to engineer a soft landing.''

Meanwhile, the key driver on the day came with the rise in the greenback due to President Biden’s re-nomination of Powell for Fed Chair. Markets were pricing for a more dovish selection in Lael Brainard.

The dollar index against a basket of currencies DXY rose 0.42% on the day to 96.53, the highest since July 2020 which in turn, saw Kiwi get shunted through 0.70 to session lows, where it now sits.