FOREX: Asia FX Wrap - The USD Drifts Lower

NZGBs closed at bests, with benchmark yields 5-6bps lower, on a data-light local session. 

• Cash US tsys are flat to 1bp richer, with a flattening bias, in today's Asia-Pac session after yesterday's modest losses. The 10-year yield continues to find good support around 4.35/40%. Today’s US calendar will see ADP, S&P Services PMI, ISM Services Index and Fed Beige Book data.
• The NZ–US 10-year yield differential closed 8 basis points tighter at +10bps, marking one of the tightest levels since February. For context, the spread was around +40bps in early April.
• Swap rates closed 4-7bps lower, with the 2s10s curve flatter.
• RBNZ dated OIS pricing closed flat to 3bps softer across meetings, with early 2026 leading. 6bps of easing is priced for July, with a cumulative 31bps by November 2025.
• Tomorrow, the local calendar will see Cotality Home Value, Volume of All Buildings and ANZ Commodity Price data alongside NZ Government 10-Month Financial Statements.
• The NZ Treasury also plans to sell NZ$200mn of the 3.00% Apr-29 bond, NZ$200mn of the 4.50% May-35 bond and NZ$50mn of the 5.00% May-54 bond.

The NZD/USD had a range of 0.5994 - 0.6014 in the Asia-Pac session, going into the London open trading around 0.6000. The NZD has found some demand just below the 0.6000 area as the US stock market pushed higher again overnight.

• Robin Brooks on X: “China was heading for deflation before US tariffs. Now goods pile up in ports and exporters struggle with rising inventories. Tariffs are inflationary for the US, but the big story is China, which will now tip into full-scale deflation.  https://x.com/robin_j_brooks/status/1929784783195836689”
• The NZD held up ok with demand seen just below 0.6000, this while the USD continued to retrace higher overnight. NZD bulls will be hoping this demand holds in order to have another go at breaking above 0.6050. This might be a big ask though before we get NFP on Friday.
• The support back towards 0.5850 has held very well, and while this continues to hold expect buyers to be around on dips. A clear break above 0.6050 could provide the spark for the next leg higher.
• CFTC Data showed Asset managers maintaining their shorts, while the leveraged community pared back only a little of the decent short they had initiated the week before.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5900(NZD401m). Upcoming Close Strikes : 0.5990(NZD390m June 5), 0.5895(NZD305m June 5)

• AUD/NZD range for the session has been 1.0752 - 1.0784, currently trading 1.0765.  A top looks in place now just above 1.0900, the market will have been looking for a more dovish tone from the RBNZ last week and AUD/NZD could now see supply on bounces. The sell zone is back towards 1.0800/25 with the first target being around 1.0650.

  Fig 1: NZD/USD Spot Daily Chart

  

  Source: MNI - Market News/Bloomberg

The AUD/USD has had a range of 0.6454 - 0.6480 in the Asia- Pac session, it is currently trading around 0.6460. The AUD tried lower on the GDP missing lower, but the bids that were around overnight again provided support towards the 0.6450 area. 

• AUSTRALIA DATA: GDP Details Signal Gradual Recovery Still In Place. While Q1 GDP was weaker than expected and slower than Q4, it was impacted by extreme weather events in the quarter which impacted exports and domestic demand. Thus there is likely to be some positive payback in Q2 and so a reaction by the RBA to the weakness at its July 8 decision is not assured. Given special factors, it is likely to watch the more timely monthly data closely for signs of a Q2 recovery..
• The AUD is basically back to where it started the day, we may have to wait for NFP on Friday to get some clearer direction.
• Price is back in the 0.6350 - 0.6550 range, a sustained break above 0.6550 is needed for the move higher to accelerate. The dips look to be well supported while above 0.6350.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6450(AUD625m), 0.6455(AUD449m). Upcoming Close Strikes : 0.6300(AUD 1.47b June 6)

• AUD/JPY - Today's range 92.83 - 93.17, it is trading currently around 93.000. Range looks 92.00 - 94.00 for now, a sustained break sub 91.50/92.00 will bring focus back to towards the lows again.

  Fig 1: AUD/USD spot Daily Chart

  

  Source: MNI - Market News/Bloomberg