NZD/USD drops towards multi-month low below 0.6950 as risk sentiment deteriorates

NZD/USD extends the previous session's downside momentum in the Asian session and retests the multi-month low in the vicinity of 0.6940 area.   

The pair witnessed heavy selling pressure in the American session and retreated further from near three-week tops, the levels just above the 0.7100 mark touched earlier in this week.

The rebound in the US Dollar Index (DXY), which measures the greenback performance against its six major rivals, drags NZD/USD toward lower levels. The DXY trades steady below 13-weeks high at 92.4 amid a fall in US Treasury yields due to renewed concerns on US  growth recovery.

The US Initial Jobless Claims rose unexpectedly, which signaled the labor market recovery remained far from Fed’s target. The data came at 373 K, above the market expectations at 350K.

Investors remain cautious about the concern on rising Delta variant COVID-19 infections. Increasing corona cases in the Asia-Pacific region underpins the demand of the US dollar on the back of its global safe haven asset.

On the other hand, Kiwi lost its ground as risk appetite worsened due to increasing COVID-19 cases in neighbouring countries as investors feared that it could derail the global economic recovery.

Meanwhile, the Reserve Bank of New Zealand (RBNZ) will announce its bond purchasing program. The Bank of New Zealand (BNZ) expected the program would end soon irrespective of the RBNZ decision to hold the amount steady at $200m or reduce it.

It is worth noting that S&P 500 Futures were trading at 4,294 with 0.043% gains.

The modest US dollar strength and a sharp deterioration in the global risk sentiment continue to influence the pair’s performance in the absence of any major fundamental catalyst.

NZD/USD additional levels