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Currency Market Analysis

Oct 20, 2021 | Currency Market Analysis

Global Themes

Kiwi at four-month highs as global bond yields jump

• Kiwi higher as local bonds yields leap
• NZDUSD nears resistance at four-month highs
• Inflation and central bank moves key

Local bond yields lead global rise

The New Zealand dollar was strongly higher overnight as bond yields around the world surged higher.

Markets have become increasingly focused on the greater likelihood of central bank rate hikes with the Reserve Bank of New Zealand likely to lead the charge after Monday’s stronger inflation reading.

The NZ ten-year bond yield has jumped from 2.10% to 2.40% in less than a week in a sign of growing rate hike expectations.

Kiwi jumps

The NZDUSD gained 1.0%.

The kiwi gained strongly versus the low-yielding currencies with the NZDEUR up 0.7% and the NZDJPY up 1.0%.

The NZD did less well versus the Australian dollar and British pound with bond yields in those countries also jumping higher this week.

The NZDAUD gained 0.1% while the NZDGBP climbed 0.5%.

Inflation key

Inflation and central bank moves remain closely watched this week.

Today, inflation readings from the UK and Canada will be key.

Later in the week, growth numbers move into focus, with the global PMI due from major economies like Japan, Germany and the US.

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