NZD/USD jumps to 7-week highs as 10-yr treasury yield hits one-year low

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  • The dovish Fed and the resulting slide in Treasury yields are boding well for the NZD. 
  • New Zealand GDP data released in early Asia, possibly added to the bid tone around the Kiwi dollar. 
  • The US-China trade tensions may cap gains. 

NZD/USD is currently trading at 0.6930 – a level last seen on Feb. 1 – having cleared the resistance of the trendline connecting the Dec. 4 and Feb. 1 highs earlier today. 

The pair is benefiting from the post-Fed slide in the treasury yields and the broad-based selling in the US dollar. For instance, the 10-year treasury yield fell ten basis points to 2.52 percent, the lowest level since Jan. 18. Meanwhile, the two-year yield also fell ten basis points to 2.37 percent and is currently trading at 2.4 percent. 

New Zealand’s GDP data released in early Asia likely strengthened the bid tone around the NZD as well. The economy expanded 0.6 percent quarter-on-quarter in the three months to December, as analysts had expected, and double the 0.3 percent pace of the third quarter, according to Statistics New Zealand. 

Looking forward, the pair may climb the immediate resistance at 0.6842 (Feb. 1), as the treasury yields look set to extend losses. A sustained break, however, may remain elusive if equities turn red in response to reports stating that US tariffs on Chinese imports could remain in place for a substantial period of time. So far, however, there are no signs of stress in the equities with the futures on the S&P 500 reporting a 0.28 percent rise.

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