- NZD/USD remains on the front foot amid broad US dollar weakness, coronavirus fears.
- Buyers pay a little heed to RBNZ’s inaction, downbeat comments from Fitch.
- COVID-19 headlines continue to weigh on the market’s risk-tone.
NZD/USD remains mildly positive around 0.6325 amid the Asian session on Monday. Even if coronavirus (COVID-19) fears flash negative signals for commodity-linked currencies like the New Zealand dollar, the Kiwi pair remains positive for the sixth day in a row amid broad US dollar weakness.
Not only the increase in numbers of COVID-19 cases but a speedy spread and a lack of major response from the US government seem to weigh on the market’s risk-tone off-late. There are more than 100,000 cases of the deadly virus worldwide whereas Saudi Arabia and Italy are trying to close interactions with the globe as much as possible.
Even so, the Kiwi pair remains positive as the market’s smell fears amid the RBNZ’s inaction despite rate cuts from the Fed and the BOC. “The RBNZ is widely expected to cut the OCR, with swift and sizeable action urgently needed. Fiscal policy needs to up the ante, too. The Government’s rainy day fund has been built up for just a time as this, with a wide range of initiatives needed to mobilize health resources and cushion the economic blow. It won’t solve the problem, but it will help – and markets need all the reassurance they can get,” said the Australia and New Zealand Banking Group (ANZ).
The global rating giant Fitch also recently crossed wires while saying that the New Zealand banks, which are dominated by the subsidiaries of major Australian banks, would feel similar effects if the Reserve Bank of New Zealand (RBNZ) opted to cut rates at its next meeting. The outbreak would increase the risk of a broad deterioration in asset quality for the banks, reflecting the slowing global economic growth, driven by China. The rating outlook of the four major Australian banks and their New Zealand subsidiaries is Negative, reflecting challenges in remediating shortcomings in operational and compliance risk management, which contribute to their profitability pressures.
The US dollar failed to pay a little heed to Friday’s better than forecast US NFP data as the greenback continues to bears the burden of broad risk-off and the US government’s inaction.
That said, the US 10-year treasury yields dropped to the fresh record low of 0.66% on Friday while the S&P 500 Futures currently shed 4.48% or 132 points to 2,831.
Markets will now pay a little heed to the coronavirus headlines for fresh direction while any surprise announcement from the RBNZ or New Zealand government will be taken seriously.
Technical Analysis
The pair’s failure to keep it below a 21-day SMA level of 0.6350 could push the buyers to remain cautious while expecting early-February lows near 0.6380. Meanwhile, 0.6280 and 0.6245/50 can offer short-term supports.
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