New Zealand Dollar Seeks Direction amid Clashing Fundamentals

The New Zealand dollar fell today but managed to rebound against some of its peers (including the Japanese yen) as positive macroeconomic data (both domestic and from abroad) clashed with the pessimistic monetary policy outlook.

Economic reports released from New Zealand over the week were surprisingly good, increasing the attractiveness of the nation’s currency to investors. Reports from China, the second biggest trading partner of New Zealand, were good too, further improving outlook for the New Zealand economy and its currency. On top of that, the vulnerability of the US dollar due to the presidential elections allowed other currencies to gain ground against the greenback, and the kiwi was not an exception, rising for three sessions in a row before halting the rally today.

Yet next week’s policy meeting undermines all the positive factors. The Reserve Bank of New Zealand conducts its last gathering in 2016 on November 9 (the next one will happen as late as February), and the vast majority of analysts expect a cut of the main interest rate by 25 basis points to 1.75%.

NZD/USD dropped from 0.7332 to 0.7301 as of 20:08 GMT today. EUR/NZD rallied from 1.5132 to 1.5199, touching the daily high of 1.5219. NZD/JPY was down from 75.48 to 75.18 intraday but rebounded to 75.51 later.

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