NZD: NZD/USD - Drifts Lower In A Quiet Asian Session Ahead Of Talks
The NZD/USD had a range today of 0.5845-0.5866 in the Asia-Pac session, it is currently trading around 0.5850, -0.15%. The NZD has drifted a little lower in a quiet Asian session. I suspect until we see what the weekend talks bring we could be sitting in limbo as this market could really go either way from here. On the day, the first support is back toward 0.5800-0.5830, the longs will be looking for this to hold for another test of the 0.5900 area, though I suspect a sustained break higher might be a lot to ask for with the event risk to come over the weekend. I suspect we trade 0.5750-0.5900 until we get clarity from the talks this weekend.
- Bloomberg - “RBNZ to Wait for Second-Quarter Data Before Rate Hike: Kiwibank. “The RBNZ is not going to make any moves until they have data in front of them. Q2 data, where the true impact of the oil crisis on the kiwi economy will really start to show, won’t be available until June/July.”
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5800(NZD503m). Upcoming Close Strikes : 0.5650(NZD310m April 15), 0.5725(NZD349m April 15), 0.5810(NZD605m April 14) - BBG
- The NZD/USD Average True Range for the last 10 Trading days: 58 Points
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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ASIA STOCKS: Outflow Momentum To Date Above Previous Cycle Lows, Ex South Korea
The charts below plot the rolling 1 month sum of Asian offshore net equity flows. The first chart is for South Korea, Taiwan and India (3 of the larger markets in the region). Momentum has clearly rolled over in all three markets, particularly since the onset of the Iran conflict. For Taiwan and India outflow momentum is above recent cycle lows though. In 2022 (the last big negative terms of trade shock), we saw very strong outflow pressures in Taiwan. In contrast, South Korean outflow pressures have been much stronger, compared to previous cycles. This may have reflected outflow pressures emerging earlier in South Korea (late Jan/early Feb), which was likely reflective of paring of risk in South Korean stocks amidst a very strong rally over the prior 12 months.
- It is a similar story in some of the South East Asian markets, see the second chart below. There are idiosyncratic stories as well, like Indonesia, which saw earlier outflow momentum amid local market pressure (amidst downgrade fears), while in Thailand inflow momentum improved on growth prospects amid a strong election result earlier in the year.
- Inflow momentum is now reversing from Thailand, while Indonesia's flow picture may had been more adverse in recent weeks, if it weren't for prior outflow pressures.
Fig 1: South Korea, Taiwan & Indian Net Equity Flows - Rolling 1 mth Sum (USD Mn)
Source: Bloomberg Finance L.P./MNI
Fig 2: Thailand, Indonesia, Malaysia & Philippines Net Equity Flows - Rolling 1 mth Sum (USD Mn)
Source: Bloomberg Finance L.P./MNI
BONDS: NZGBS: Closed Modest Bull-Steepener
NZGBs closed showing a bull-steepener, with yields 1-3bps across benchmarks, after another data-light day.
- NZGBs had a mixed performance versus their $-bloc counterparts, with the NZ-US 10-year yield differential 3bps lower, but the NZ-AU differential 1bp wider.
- Cash US tsys are 1-2bps richer in today's Asia-Pac session after yesterday's bear-steepener.
- Swap rates closed 1-2bps lower.
- RBNZ-dated OIS pricing closed little changed across meetings. No tightening is priced for April, while December 2026 assigns 44bps.
- Tomorrow, the local calendar will see release of Q4 Mfg Activity data.
- On Thursday, the NZ Treasury plans to sell NZ$250mn of the 1.50% May-31 bond, NZ$150mn of the 4.25% May-34 bond and NZ$50mn of the 1.75% May-41 bond.
NZD: NZD/USD - Dragged Higher By AUD & Risk
The NZD/USD had a range today of 0.5921-0.5944 in the Asia-Pac session, it is currently trading around 0.5940, +0.20%. Oil has slipped lower again as IEA proposes to release strategic reserves, this together with a surging AUD has seen the NZD drift higher in our session. On the day, I suspect sellers could return back toward the 0.5960 area and then above 0.6000, looking for the pair to move lower at some point. It looks like the range is a messy 0.5840-0.6020 but the NZD does not have the demand the AUD is seeing and continues to lag for now. A sustained break below 0.5800 is needed to see the move lower gather momentum and indicate a deeper move is on the cards.
- “The greenback is having a petrocurrency moment, with a measure of near-term correlation between oil and the dollar turning sharply positive. The currency’s rise has been catalyzed by the US’s position as the world’s top oil producer and the dollar’s role in global crude trade.” - BBG
- Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5755(NZD334m March 12), 0.5790(NZD310m March 13) - BBG
- The NZD/USD Average True Range for the last 10 Trading days: 56 Points
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
