Week In FX Asia: Kiwi On Steroids

Includes: ENZL, FXA, UDN, UUP
by: Dean Popplewell

By Dean Popplewell

The Kiwi is ending the week on a high note, receiving solid support from improving risk market appetite. Gains on the week have been impressive (+1.7%, w/w) as the topside remains in favor with traders. Also aiding the currency's flight has been the bullish comments from RBNZ earlier this week. Currently and along with the AUD, the NZD is very much in vogue ($0.8665).

Earlier in the week good solid data led the Kiwi charge higher. New Zealand reported a stellar trade surplus number for February (+$818m, m/m and +$649m for the year ended in February). It was the widest surplus in three years.

Governor Wheeler and his fellow policy makers at the RBNZ continue to communicate their tightening bias. This month the central bank lifted the Official Cash Rate by +25bps to +2.75% and is widely expected to keep raising rates over the remainder of the year. The futures market has priced the cash rate to be at 3.75% by year-end.

Despite being a currency on steroids there is a danger for a market correction. With many forex participants expecting the USD to eventually grind higher - because of a hawkish Fed - many will focus on next week's US jobs data for direction. A much stronger than anticipated NFP headline should give the dollar that much needed support to outperform the G20 currencies, a headline close to expectations the market should see better levels to want to own the NZD.