NZD/USD trades heavy in the open on a firmer US dollar

NZD/USD rose from a 0.5910 low to 0.6040 on Friday but the dollar is a little firmer in the open this week which is weighing on the bird, -0.47% at the time fo writing, with the price moving from a high of 0.6033 to a low of 0.5992. The markets are in a state of flux and pouncing on every bit of encouraging news that can possibly surface from the COVID-19 crisis. 

First and foremost, the bird is weak following the Reserve Bank of New Zealand (RBNZ) decision to implement a Large Scale Asset Purchase programme (LSAP) of New Zealand government bonds to support the economy amid the coronavirus outbreak.

The programme, which aims to provide further support to the economy, build confidence, and keep interest rates on government bonds low and what was announced on the 22nd March, is buying up to NZ$30 billion ($17 billion) of New Zealand government bonds, across a range of maturities, in the secondary market over the next 12 months, RBNSZ said in a statement.

In the latest move, in addition to the prior package, the RBNZ is to provide additional liquidity to the corporate sector via a new weekly Open Market Operation (OMO) that offers another channel for banks to continue funding their corporate clients. The new corporate OMOs will be held each Tuesday and operate similar to the reserve bank's regular OMOs. “Our objective is to encourage banks to continue to fund their corporate clients by purchasing their debt securities, given the confidence that these securities can be funded by exchanging them with us for cash. In this way, by banking the banks, we are ensuring large businesses can better manage their cash flows, and lower their funding costs," said Assistant Governor Christian Hawkesby – adding – “we are committed to support smooth market functioning,” he said.

The US dollar bounces back

As for the US dollar,  huge-scale Federal Reserve and Treasury backstopping against virus losses and the US stock markets failure to maintain a bid into Friday's close and month-end sparked up fresh uncertainty about further USD selling. The DXY has popped in the open, rallying off the daily cloud top and back above a 50% Fibo of the March recovery and the March 13 swing high today. A 38.2% Fibo broken below on Thursday at 99.98 is so far capping the rebound and investor will be waiting patiently in the wings for the House debate over the coronavirus relief bill.

NZD/USD levels