The Kiwi sold off steeply on Thursday, reversing back from Asia highs beyond 0.7250 all the way to lows around the 0.7160 price, a decline on the day of about 1% and a session high to low reversal of more than 100 pips. This means that all of Wednesday’s post-FOMC gains have been cleared out.
The NZDUSD is now only trading very moderately above lows of the week in the 0.7150s. A break below this would open the door to a move back towards monthly lows just above 0.7100.
Downbeat New Zealand Q4 2020 GDP growth data released during Thursday’s Asia Pacific session seemed to hang over the kiwi for the whole session and, by the close of Thursday FX trade, the kiwi was one of the worst-performing currencies in the G10. The primary driver of the drop in NZDUSD came from the US side of the equation, with the greenback broadly boosted by a rise in US government bond yields and a sharp sell-off in energy markets.
Specifically, for Asia sentiment-sensitive currencies such as the AUD and NZD over the next 24 hours is talks between high-level US and Chinese officials in Alaska. The two-day meeting of officials just begun and, as expected, US Secretary of State Anthony Blinken has told Chinese officials that the US is committed to firming the international rules-based order and has warned Chinese officials that the US will be raising the issues of; China’s oppression of the Uyghur Muslims in Xinjiang, China’s undermining of Hong Kong’s autonomy, the recent uptick in military posturing and aggression towards Taiwan and recent malicious Chinese cyberattacks on US companies and institutions.
The Chinese press reported earlier in the week that China will ask the US to reverse the trade policies of the Trump administration, but the US is very unlikely to give away this leverage so easily and, according to Chinese political observers, Friday’s talks are not expected to mark a significant turning point for the US China relations.
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