The New Zealand dollar has reversed directions on Thursday and is in positive territory. NZD/USD is currently trading at 0.6887, up 0.29% on the day.
New Zealand dollar slides to 4-week low
It has been a rough patch for the New Zealand dollar, which has fallen 1.9% this week and fell to a 4-week low. The currency dropped 1.30% overnight, as the number of Covid cases rose in Auckland and Federal Reserve members sent out hawkish signals.
Authorities in Auckland reported 45 new Covid cases, bring the number of cases in the current wave to 1,230. These numbers are low compared to other countries, but New Zealand was free of Covid until August. The government responded with a nationwide lockdown, and Auckland has been under lockdown for over a month. There are growing calls to review the ‘zero tolerance’ stance and reopen the country’s borders and revive the dormant tourist industry.
The US dollar is looking sharp. The dollar index rose to 94.47 earlier today, just below its 52-week high of 94.50, and 10-year Treasury yields are at their highest levels since June. The markets are of the view that higher inflation is not about to dissipate, and this is raising expectations that the Fed will respond by tightening policy in order to keep a lid on inflation. Fed Chair Jerome Powell acknowledged in congressional testimony this week that the jump in inflation could last longer than the Fed had anticipated.
Fed members have been sending out hawkish messages this week. James Bullard said that the Fed might need two rate hikes in 2022 in order to combat inflation, and Patrick Harker stated “it will soon be time to begin slowly and methodically” taper the Fed’s bond purchase program. Harker added that he would support tapering as early as November.
NZD/USD Technical
- There are resistance lines at 0.6981 and 0.7077
- There is weak support at 0.6855. Next is a monthly support line at 0.6698
