NZD/USD currency pair falls from the September 3 levels at 0.7158 on profit-taking after a swift rally in August. It took support at the 0.7001 levels on September 21.
NZD/USD Currency Pair Supported at 0.7001 Levels
The NZD/USD pair saw a brisk rally in the last week of August, as it surged from 0.6825 levels to 0.7158 levels, an increase of 4.8%.
Profit-taking in September brought down the currency pair from the highs of 0.7158, but it took support at the 0.7001 levels. The level at 0.7000 lends support to the NZ Dollar to US Dollar in the foreign exchange market.
On Friday, September 24, 2021, the NZ Dollar to US Dollar fell from $0.7081 to $0.6997 during trading hours on the last day of the week though it recovered to close at 0.7017 levels on Friday.
Weakness in the USD strengthened the NZD/USD currency trading on Thursday. But on Friday, the currency pair lost momentum and was on a downward streak.
GDP rises for the second quarter of 2021. However, the third quarter may not be good, as lockdown restrictions affect daily activities. Now that Covid cases are coming down, economic growth in New Zealand may return by the fourth quarter, predict economists. It will drive the NZD/USD higher.
GDP Rises for the June Quarter by 2.8%
GDP quarter on quarter has risen from 1.4% the previous quarter to 2.8% in the June quarter. The NZD/USD went up 20 pips on the back of the news.
The NZ Dollar to US Dollar zooms higher with GDP growing above expectations, with a rise in service industries linked to retail trade, tourism, and accommodation.
The GDP, which measures the economic activity of a country, is the primary gauge of the health of the New Zealand economy. Growth was seen most in the services industries. Retail trade improved along with the accommodation sector, strengthening the GDP growth for the quarter ended June 2021.
The current account improves from -3.19 billion to -1.396 billion for the second quarter of 2021. Business Manufacturing Index is lower from 62.4 to 40.1.
Westpac Consumer Sentiment is at 102.7, lower than the previous data at 107.1. Westpac expects the New Zealand economy to contract for the September quarter by 4% and recovery by 1.6% for the last quarter of 2021.
Credit Card spending year on year has come down from 6.9% to -6.3%. GDT price index has moved from 4.0% to 1.0%.
Trade Balance is down from -397 million to -214 million month-on-month. Exports decreased from $5.7 billion to $4.3 billion. International travel restrictions have come down with covid cases increasing. Imports have gone up from $6.2 billion to $6.4 billion.
Policy Expectations from the RBNZ
Prime Minister Jacinda Ardern says that 75% of adults in New Zealand have had at least one shot of the vaccination. The target set is to vaccinate at least 90% of the people. The vaccination drive has brought immunity from the Covid virus. Business activities are improving as people move out of the house for jobs and spend on leisure activities.
The Reserve Bank of New Zealand will meet on October 5. However, policy changes will remain unchanged until February 2022 say, analysts. The RBNZ cut down interest rates at the beginning of the pandemic, one of the first countries to do so, which devalued the NZD.
The Chinese economy took a big hit when Evergrande, the giant real-estate firm in China, struggled. The firm’s restricting plans will help to improve the firm’s position. It also gained government support to prevent further downside. With risk appetite improving, the forex rate New Zealand Dollar to the US Dollar has come down.
China is an important trade partner of New Zealand, and slowing growth in China brought down trade volume between the two countries. Demand for New Zealand goods slowed down, lowering exports.
The pandemic caused a severe blow to the New Zealand economy. New Zealand depends on its tourism sector, which dropped with the pandemic lockdown restriction on the border. The lockdown easing in New South Wales and Victoria will bring in economic growth, predict economists.
Profit Taking Drives NZD/JPY Lower
The NZ Dollar to Japanese Yen saw a strong rally in the second half of August.
NZD/JPY currency pair surged from 74.80 levels to 78.61 levels, an increase of 5.08% in the last two weeks of August. The currency pair is declining in September with profit-taking after the strong rally in August. If the positive momentum continues, the NZD/JPY currency pair in the forex markets may touch the highs reached on September 2 at 78.56.
The Fed Keeps Rates Unchanged
The Fed left key rates unchanged at 0.25% at the meeting last week. However, signals of a rate hike and tapering measures show good economic health. Talks on the $3.5 trillion stimuli have brought optimism to the economy. The vaccination drive has been progressing well.
The US Dollar closed at 93.33 levels on Friday, September 24. The greenback gained modestly after the sharp decline on Thursday. The DXY will gain further if the Wall Street index shows weakness on Monday. A stronger US Dollar brings an adverse reaction to the New Zealand Dollar and vice versa.