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Forex Flash: Kiwi in focus following Wheeler comments – UBS

The New Zealand dollar was the center of attention overnight after RBNZ Governor Wheeler appeared to talk down the currency. According to Research Analyst Gareth Berry at UBS, “It was mostly a matter of perception however the earlier 60 pip drop in the NZD/USD was the result of a handful of carefully-chosen phrases, delivered in the correct sequence, with the correct emphasis.”

The governor again ruled out the use of quantitative easing to bring the currency down, and clearly has no appetite for a Swiss-style currency cap (which he described as a "particularly risky strategy" for New Zealand). An interest rate cut designed purely to weaken the currency is also still off-limits.

However, he managed to stiffen the language around intervention slightly, even if he was just reiterating (in general terms) the Bank's existing policy on the matter. Wheeler announced that "the bank will intervene when circumstances are right". This sounds more active than previous guidance in which Wheeler said the Bank "will be prepared to intervene" if a range of conditions are met. The message is the same, but was packaged differently this time, and investors noticed.

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Forex: NZD/USD recovers the 0.8400 mark

The New Zealand dollar stole the spotlight overnight after RBNZ Governor Wheeler appeared to talk down the currency. According to Research Analyst Gareth Berry at UBS, “It was mostly a matter of perception however the earlier 60 pip drop in the NZD/USD was the result of a handful of carefully-chosen phrases, delivered in the correct sequence, with the correct emphasis.” After bottoming out in the 0.8393 region (session low) earlier today during the onset of European trading, the pair has recovered the mark of 0.8408/10 in these moments.
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