NZD/USD rising higher in wild markets, RBNZ next in focus

• Commodity currencies were seeing good two-way business, NZD rising higher again.
• RBNZ: Bank has no immediate intention in resorting to unconventional monetary policy.

The NZD/USD dropped overnight from 0.6260 to 0.6092 and marked an 11-year low. At the time of writing, NZ/USD is trading a 0.6140 having travelled between a low of 0.6085 and 0.6160. 

It was a wild day on Wall Street and the commodity currencies were seeing good two-way business following the European Central Bank event which supported the US dollar. However, the dollar's bid soon gave up the ghost following Federal Reserve market operations which helped to support the antipodeans higher.  

The US Federal Reserve announced a significant injection of cash to assure liquidity and help stem the panic in the markets, addressing the "highly unusual" and "temporary disruptions in the Treasury financing markets." "The NY Fed said it is expanding its asset purchases beyond treasury bills to a range of maturities including nominal and inflation-linked bonds, and floating rate notes. It conducted a $500bn 3mth repo overnight, and will offer on Friday a further $1tr. The existing daily $175bn overnight repos and $45bn 2wk repos (twice per week) will continue," analysts at Westpac explained. 

RBNZ in focus

Meanwhile, analysts at ANZ pointed out the near term upside risks to the Kiwi, "particularly given the RBNZ’s outwardly confident tone. But the RBNZ will be forced to act given scale of the global COVID-19 shock, and the NZD remains a key release valve. Timing is everything."

Casting minds back, the RBNZ Governor Orr outlined the Bank's suite of possible unconventional monetary policy tools at its disposal: "The Governor made clear that the Bank has no immediate intention in resorting to unconventional monetary policy, a view that we also share for the current cycle; the Governor noting "We are fortunate, unlike many other OECD economies, to have the time to prepare for such possible needs". That said, this will not prevent markets from pricing in this possibility," analysts at TD Securities noted. 

NZD/USD levels