The NZD has been by far the strongest performing G10 currency over the past fortnight. Globally, a modest pullback in the USD has been the dominant driver of currency markets, as US bond yields have eased off their previous highs. However, domestic factors have also underpinned the NZD. Last week, the RBNZ explicitly warned, for the first time, that the next move in rates is up. This shouldn’t have been a massive surprise. But it did send market participants scrambling to price in earlier rate hikes. As a result, NZ dollar interest rate differentials soared. NZ-US 3-year swap differentials poked above 290bps for the first time since September 2011.
Read the full report: FX Research
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