NZD / USD reversal from 0.6720 extends to 0.6630 area

• NZD / USD retreats from five-week highs at 0.6720 to lows at 0.6630.
• Kiwifruit trim gains as market sentiment deteriorates.
• COVID-19 and the US elections are curbing risk appetite.

The New Zealand dollar is undergoing a sharp reversal on Wednesday. The pair has pulled back from the five-week highs at 0.6720 to hit session lows at 0.6630 so far.

The kiwi loses balance and the risk sentiment sinks

The NZD / USD it has lost more than 0.8% so far, with the US dollar driven by safe haven demand amid strong risk aversion sentiment. Investor concerns about the growing number of infections in Europe and the US and uncertainty about the outcome of the US elections have crushed investors’ risk appetite.

News that France and Germany are considering new lockdowns to curb the rising number of infections, after Spain and Italy introduced a new round of restrictions last week, has raised concerns about the impact on the nascent economic recovery.

Beyond that, the uncertainty about the outcome of the US elections, scheduled for next Tuesday, has contributed to keeping the appetite for risk under control. Although the market anticipates Biden’s victory, the gap between the candidates in the polls appears to be narrowing. The market is increasingly cautious, preparing for strong price movements ahead of the elections.

Against this backdrop, stock indices are experiencing significant declines, with safe haven assets such as the US dollar and the yen appreciating across the board. The US dollar index, which measures the strength of the dollar against a basket of the most traded currencies, has risen 0.3% to hit a week-long high at 93.60.