- The NZD / USD captures new purchases on Friday and recovers a significant part of the previous day’s decline.
- The stability in the markets benefits the NZD with the highest perceived risk amid moderate demand for the USD.
- High US bond yields help limit losses around the USD and could limit the pair’s rally.
The pair NZD / USD moves higher during the early part of the European session on Friday and hits new daily highs around 0.7185-90 region in the last hour.
The pair has managed to regain positive traction on the last day of the week and now has recovered a significant part of the previous day’s retracement drop from the highest level since June. The news that Evergrande Making funds available for a bond coupon to a trust account helped ease concerns about a credit crunch in China’s real estate sector. This, in turn, has weighed on the safe-haven US dollar and has acted as a tailwind for the highest perceived risk NZD.
In the meantime, dollar decline continues to be supported, at least for now, amid high yields of US Treasury bonds. It is worth remembering that the benchmark 10-year US government bond yield rose to its highest level since May 13, around 1,683% on Thursday, amid expectations of an early tightening of monetary policies by the Fed.
The speculations were bolstered by comments from Fed Governor Christopher Waller, saying that the US central bank may have to act faster if inflation remains too high. In addition to this, Atlanta Fed Chairman Raphael Bostic said that he has pointed to a rate hike late in the third quarter, perhaps early in the fourth quarter of 2022. That said, rising expectations for a further rise in interest rates by RBNZ has continued to support the buying tone around the NZD / USD pair.
Market participants are now awaiting the US economic calendar, which highlights the release of preliminary PMI figures for manufacturing and services at the start of the US session. This, along with US bond yields, will influence USD price dynamics and could create some momentum for the NZD / USD pair. Investors will take cues from the broader market risk sentiment to seize some short-term opportunities around the pair.
NZD / USD technical levels