Forex Market: NZD/USD falls to a fresh two-week low, tracking a selloff in equities, RBNZ readies a package of additional policy tools

NZD/USD extended a pullback from 2020 high of 0.6789 and touched lows not seen in two weeks on Wednesday as the Reserve Bank of New Zealand is “actively preparing a package of additional monetary policy tools to support the economy if required.”

The most recent statement by RBNZ Governor Adrian Orr hinted that the central bank would use more unconventional policy tools, including negative wholesale interest rates and direct funding to banks. Orr also stressed that “the design of the package needs to ensure our monetary policy decisions have their maximum impact.”

The RBNZ Governor added that “our commitment is to clearly communicate our future monetary policy strategies and tools, and when we might use them.”

The central bank may provide a more detailed forward guidance at its upcoming policy meeting on September 22nd, while the kiwi dollar remains vulnerable to any further hints pointing to a shift in RBNZ’s monetary policy.

Meanwhile, the US Dollar held on to recent gains against major peers as investor risk sentiment faded, triggering a selloff in equities. The DXY was up 0.07% on Wednesday to 93.58.

“The tech selloff has caught the market by surprise and it is a bit jittery as to whether there are broader implications,” Bank of Singapore currency analyst Moh Siong Sim said.

“It might force some position unwinding in other parts of the market, and that’s probably what we’re seeing right now.”

As of 7:03 GMT on Wednesday NZD/USD was inching up 0.03% to trade at 0.6621, after earlier touching an intraday low of 0.6601, or its weakest level since August 27th (0.6600). The major pair has retreated 1.67% so far in September, following five straight months of gains.

In terms of economic calendar, the number of job openings in the United States probably increased to 6.0 million in July, according to market expectations, from 5.889 million in June. Still, however, vacancies were well below their pre-pandemic level of around 7 million. The official report is due out at 14:00 GMT.

Bond Yield Spread

The spread between 1-year New Zealand and 1-year US bond yields, which reflects the flow of funds in a short term, equaled 5.4 basis points (0.054%) as of 6:15 GMT on Wednesday, down from 5.9 basis points on September 8th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.6646
R1 – 0.6680
R2 – 0.6741
R3 – 0.6774
R4 – 0.6808

S1 – 0.6585
S2 – 0.6551
S3 – 0.6490
S4 – 0.6429

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