NZD/USD: Kiwi could weaken if this current risk-off theme persists into next week and beyond – MUFG

Analysts at MUFG Bank, point out that the Kiwi (NZD) could suffer on new measures from the Reserve Bank of New Zealand brought forward on risk-off. They had a trade idea of shoring NZD/USD at 0.6550 with a target at 0.6300 and a stop-loss at 0.6710. 

Key Quotes:

“The RBNZ signalled its willingness to ease its monetary stance further at its meeting this week. However, the first step likely was the launch of a Funding for Lending Program that will be up and ready to run by the end of the year. The futures market in New Zealand does not anticipate any quick shift into negative rates territory or any action to intervene directly to lower the level of NZD. While it is understandable that the RBNZ does not yet see urgency to take any bold steps, a continued deterioration in global financial market conditions with COVID infections escalating in Europe would likely see the markets increase the probability of more aggressive action sooner than anticipated.”

“NZD has held up better in September relative to other G10 currencies (outperforming AUD, GBP, SEK and NOK) but that could change if this current risk-off theme persists into next week and beyond. We also have month-end to consider next week with expectations in the market of USD-demand related flows.”