Euro weighed down by waning hopes for peace in Ukraine, kiwi wobbles

013, Apr 2022

SINGAPORE (Reuters) The euro was pinned to a five-week low on Wednesday as prospects for peace in Ukraine seemed to darken, while the kiwi was whipsawed after New Zealand's central bank announced its sharpest rate hike in two decades to curb inflation.

lite_finance

While the 50 basis point hike by the Reserve Bank of New Zealand was larger than many economists had expected, it was within traders' expectations, and policymakers tempered the move by not lifting their projected peak for rates.

The Bank of Canada meets later on Wednesday and is also expected to deliver its sharpest hike since 2000 as policymakers around the world start hastening efforts to contain growing price pressures.

The kiwi flickered as high as $0.6902 after the Reserve Bank of New Zealand lifted its official cash rate (OCR) to 1.5%.

But the currency recoiled from resistance around its 200-day moving average, and was last nearly 1.5% below its intraday high at $0.6811, as the central bank framed its actions as pulling forward hikes without changing its outlook.

🎩Top THREE Award-Winning Brokers in 2022🎩
LiteFinance | IC Markets | Avatrade


Analysts reckoned support for the currency might be shortlived.

"It's sort of a dovish 50-point hike," said Jason Wong, senior markets strategist at BNZ in Wellingon.

"They're saying it's just a bringing forward of a hike and the RBNZ hasn't really changed it's view on the OCR outlook from the February statement," he added, noting that the market has a far more hawkish peak rate forecast than the central bank does.

Elsewhere, traders were unmoved by a slight stiffening in Japanese officials' language about the fast-weakening yen, which was under considerable pressure at 125.60 per dollar, within a whisker of breaking a major support level at 125.86.

Finance Minister Shunichi Suzuki said the government was watching currency moves with a sense of urgency.

The yen had enjoyed a moment's respite overnight when cooler-than-expected U.S. inflation data set bonds rallying and investors hoping that price pressures might have peaked.

A second straight monthly decline in prices of used cars held core CPI to a 0.3% gain in March, against an expected 0.5% rise. But, since headline annual inflation nevertheless came in at an eyewatering 8.5% and rapid rate hikes still loom, it wasn't enough to drive investors out of dollars.

Russian President Vladimir Putin's description of on-and-off peace negotiations as "a dead-end situation" on Tuesday also put a weight on the euro and sterling, which have been vulnerable to concern about the war's economic fallout.

The euro dropped to $1.0821 overnight and hovered nearby at $1.0835 in the Asian session. Sterling, which has been pegged near $1.30, held at $1.3001.

The Australian dollar and Chinese yuan also weakened slightly after a surprise plunge in China's imports added to investor worries about weakening demand.

Dollar denominated imports fell 0.1%, the first drop since August 2020, against expectations for a rise of 8% and the Aussie wobbled 0.1% lower to $0.7445.

The yuan inched marginally lower after the data to hold steady for the day at 6.3661 per dollar. [CNY/]

The Canadian dollar firmed through its 200-day moving average to C$1.2614 in Asia, though traders are jittery ahead of the Bank of Canada meeting, especially as the market is slightly short USD/CAD.

Recent Article


What indicators do professional traders use?


"I think the risk around the Bank of Canada meeting is that they sound balanced enough to trigger a wipeout of USD/CAD shorts," said Brent Donnelly, president at analytics firm Spectra Markets.

Policy decisions are due in Singapore and Europe later in the week.

========================================================

Currency bid prices at 0518 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar

$1.0832 $1.0826 +0.05% +0.00% +1.0840 +1.0812

Dollar/Yen

125.6550 125.3550 +0.15% +0.00% +125.7200 +125.3550

Euro/Yen

136.10 135.73 +0.27% +0.00% +136.1600 +135.7100

Dollar/Swiss

0.9329 0.9324 +0.05% +0.00% +0.9338 +0.9324

Sterling/Dollar

1.3000 1.3000 +0.00% +0.00% +1.3014 +1.2987

Dollar/Canadian

1.2628 1.2641 -0.09% +0.00% +1.2642 +1.2611

Aussie/Dollar

0.7444 0.7455 -0.15% +0.00% +0.7475 +0.7443

NZ

Dollar/Dollar 0.6818 0.6850 -0.46% -0.38% +0.6901 +0.6810

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

lite_finance