Commodity currencies were among the weakest on the Forex market today as the optimism caused by the news about a coronavirus vaccine continued to wane. The New Zealand dollar was the biggest loser, falling even against its commodity-linked counterparts. Negative domestic macroeconomic data put additional pressure on the currency.
Statistics New Zealand reported that the food price index fell by 0.7% in October after dropping by 1.0% in the previous month. With seasonal adjustments, the drop was 0.1%.
The seasonally adjusted BusinessNZ Performance of Manufacturing Index dropped to 51.7 in October from 54.0 in September. BusinessNZ’s executive director for manufacturing Catherine Beard commented on the result:
Despite a relatively strong showing with the key indices of production and new orders in September, October saw both slide to lower levels of expansion. On a brighter note, employment (52.6) reached its highest level since April 2018.
BNZ Senior Economist, Craig Ebert added:
October’s PMI serves as a gentle reminder of not getting too carried away with the sense of recovery, even if the worst of COVIDâs impacts can be assumed to be behind us.
Adrian Orr, Governor at the Reserve Bank of New Zealand, also warned against being carried away by good news, saying:
If the economy continued to grow and do what itâs doing, well thatâs a beautiful world, but thatâs a big if.
He explained that the growth and inflation projections made in the Monetary Policy Statement released earlier this week were made with an assumption that the borders will be fully reopened by 2022:
Now that is a very bold assumption, and even with that assumption we are still having to maintain very stimulatory monetary policy with interest rates at record lows.
The Governor also said that the central bank has been “at pains to explain to people that we are creating scenarios, not projections of certainty”.
NZD/USD was down from 0.6839 to 0.6814 intraday but has rebounded to 0.6831 by 8:16 GMT today. EUR/NZD rose from 1.7250 to 1.7293. NZD/JPY fell from 71.88 to 71.77, reaching the low of 71.49 intraday.
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