NZD: Asia Wrap - NZD/USD Extends Higher

The Asia-Pac USD/JPY range has been 142.12 - 142.96, Asia is currently trading around 142.55. USD/JPY was under pressure early in our session as BOJ Governor Ueda sounded confident the central bank would meet its inflation target. A headline late in our session: "Japan's Ministry of Finance will consider tweaking the composition of its bond issuance plan for the current fiscal year ending in March 2026, which could involve trimming the issuance of super-long bonds, two sources with direct knowledge of the plan told Reuters". The long end in the JGB's extended their move lower late in our session and USD/JPY is attempting to bounce off its lows.

• MNI: BOJ's Ueda Sees Inflation Near 2%, Easing Still Needed https://www.mnimarkets.com/articles/mni-bojs-ueda-sees-inflation-near-2percent-easing-still-needed-1748306760883
• “The upcoming 40-year JGB auction tomorrow will be closely watched following a lackluster 20-year sale last week — a sign of the caution that still runs deep among long-end investors.”(BBG)
• Robin Brooks on X : Japan is at the heart of the global rise in long-term yields. To be honest, I'm surprised the rise has been allowed to be as rapid as it has. At 240% debt to GDP, Japan really can't allow long-term yields to keep rising the way they have. This is where fiscal dominance is acute. https://x.com/robin_j_brooks/status/1926991620370522435
• USD/JPY again struggled to hold onto any gains above 143.00, can Ueda’s comments get it to break below 142.00 or does this level hold again.
• The price action last week shows the market is still much more comfortable selling rallies, resistance is now back towards 144.00/145.00. The focus will turn once more to the pivotal 140.00 area, a break of which will open a much deeper move lower.

• Options : Close significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 143.00($1.81b May 28), 143.00($3.06b May 30), 140.00($2.68b May 30).

  Fig 1 : JGB 30 Year Daily Chart

  

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• The RBNZ decision is announced on May 28 and rates are widely expected to be cut 25bp to 3.25% bringing total easing this cycle to 225bp. 23 out of 24 analysts surveyed by Bloomberg are forecasting this outcome.
• Given heightened uncertainty, the MPC is likely to retain its easing bias again stating it has “scope” to cut rates further if required and its updated OCR path will be scrutinised to this end. A downward revision bringing the terminal to below 3%, estimated 'neutral', would signal a need for accommodation.
• The attention will be on the medium-term which is likely to show a softer outlook driven by weaker trading-partner growth due to recent global uncertainty. The RBNZ said in April that “on balance, these developments create downward risks to the outlook for economic activity and inflation in New Zealand”.
• Markets continue to price in 25bps of easing for the May meeting, with a total of 64bps expected by November 2025.

The NZD/USD had a range of 0.5986 - 0.6007 in the Asia-Pac session, going into the London open trading around 0.5995. The NZD has drifted a little lower in a quiet Asian session, with US Stocks giving back their small overnight gains.

• (Bloomberg) - “Data since the April meeting have shown a softer labor market. Inflation has perked up but not enough to stop the RBNZ from proceeding with a 25-bp rate cut.”
• “There is significant downside risk to the growth outlook stemming from the global trade war. Even so, the 1Q CPI outcome is likely to see the RBNZ maintain its current OCR projections for only modest rate cuts.”
• Markets continue to price in 25bps of easing for tomorrow's meeting, with 64bps expected by November 2025.
• The NZD continues to trade in a 0.5850/0.6050 range, can it find the momentum to break this week, as the “sell America” trade gathers pace.
• The support back towards 0.5800 has held very well, and while this continues to hold expect buyers to be around on dips. The first target is the highs just above 0.6000, a break here could provide the spark for the next leg higher.
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes :  0.5725(NZD1.09b May 28)
• CFTC Data showed Asset managers maintaining their shorts, while the leveraged community added a decent clip back to their own short.

• AUD/NZD range for the session has been 1.0803 - 1.0824, currently trading 1.0820. A sustained break above 1.0930 is needed to turn the focus higher, until then expect supply on bounces.

  Fig 1: AUD/NZD Spot Daily Chart

  

  Source: MNI - Market News/Bloomberg