NZD/USD’s reversal from 0.6720 extends to 0.6630 area

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  • NZD/USD retreats from five-week highs at 0.6720 to 0.6630 lows.
  • Kiwi gives away gains as market sentiment deteriorates.
  • COVID-19 and the US elections are curbing appetite for risk.

The New Zealand dollar is going through a sharp reversal on Wednesday. The pair has retreated from five-week highs at 0.6720 to hit session lows at 0.6630 so far.  

The kiwi loses footing with risk sentiment plunging

NZD/USD has given away more than 0.8% so far today, with the US dollar buoyed by safe-haven demand amid strong risk-averse sentiment. Investors’ concerns about the growing number of infections in Europe and the US and the uncertainty about the outcome of US elections have crushed investor’s appetite for risk.

News that France and Germany are considering new lockdowns to curb the surging number of infections, after Spain and Italy introduced a fresh round of restrictions last week, has increased concerns about the impact on the incipient economic recovery.

Beyond that, the uncertainty about the outcome US elections, due next Tuesday, has contributed to keeping risk appetite on check. Although the market anticipates Biden’s victory, the distance of the candidates in the polls seems to be tightening. The market is growing increasingly cautions, bracing for sharp price movements ahead of the elections.

In this backdrop, equity indexes are going through significant declines, with safe-haven assets like the US dollar and the yen appreciating across the board. The US Dollar Index, which measures the strength of the dollar against a basket of the most traded currencies, has gone 0.3% up to hit one-week highs at 93.60.

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