Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Kiwi leads overnight gains
A second day of strong gains in US sharemarkets boosted global sentiment and helped the AUD/USD near three-month highs and the NZD/USD surge to the highest level since mid-December.
The New Zealand dollar led markets with the NZD/USD up a massive 1.2% as it broke above the recent highs at 0.5775 that have capped gains. The NZD/AUD hit three-month highs.
The AUD/USD was also higher, up 0.9%, but the pair remains within the recent trading range with the Aussie still stuck below key resistance at 0.6400.
In Asia, the US dollar was mostly lower.
The USD/SGD fell 0.3% with the pair back at four-month lows.
The USD/CNH dropped 0.2% with this market also back at four-month lows.
JPY weaker as BoJ looms
Across Asia, the upcoming focus is the announcement of the Bank of Japan’s monetary policy meeting, due Wednesday at 2.00pm AEDT.
We anticipate that the policy rate will remain unchanged. It’s probable that communication will take precedence over policy choices.
We’ll be concentrating on BOJ Governor Kazuo Ueda’s evaluation of the following during the press conference: (1) the rate and scope of wage increases; (2) the slowness of consumer spending; (3) substantial increases in food prices that defy inflation due to the so-called first and second forces; and (4) the unpredictability of US economic policy.
While the USD/JPY was higher overnight, the pair remains down for the second straight month, weighed down by narrowing US-Japan yield spreads and rising safe-haven demand for the JPY.
The Japanese yen fell to one-month lows versus the Australian and Singapore dollars.
GBP remains mostly stronger ahead of BoE
Sticking with central banks, the US Federal Reserve is due Thursday morning while the Bank of England decision is due Thursday at 11.00pm AEDT.
We do not anticipate any policy changes from the Bank of England this month, with the BoE most likely to cut in the meetings that accompany the Monetary Policy Report releases, with a target terminal rate of 3.50%,
The GBP/USD was back at four-month highs overnight. The GBP has recently weakened versus the Aussie and the kiwi – after reaching around five-year highs – but the GBP/SGD remains near one-year highs.
Aussie, kiwi at three-month highs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 17 – 22 March
All times AEDT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.