The New Zealand dollar has steadied after taking a tumble on Thursday. In the European session, NZD/USD is trading quietly at the 0.67 line.
New Zealand dollar plunges as risk apprehension soars
There was no shortage of volatility in the currency markets on Thursday, as panicky investors dumped pretty much everything and flocked to the safety of the US dollar. The old adage of buying US dollars during wartime was very much in force, although the greenback did give up some of its massive gains. The New Zealand dollar is highly sensitive to risk and fell as much as 2 per cent on Thursday before clawing back about half of those losses. Still, NZD/USD recorded its worst daily performance since September 2021.
The Russian attack on Ukraine sent NZD/USD tumbling, but the currency was able to recover after President Biden’s second round of sanctions were not as severe as anticipated. Biden is reluctant to take any steps that would raise gasoline prices for US consumers, so there were no sanctions against Russian energy entities. Also, the US could not get Europe to agree to exclude Russia from SWIFT, the global interbank payment system. This revived the markets and gave a boost to the New Zealand dollar.
The US and Europe have sharply condemned the Russian military operation but are clearly not willing to make significant sacrifices to take on Russia – in the words of one my colleagues at OANDA, Jeff Halley, the West has thrown Ukraine under the geopolitical bus. The markets seized on this as we saw a buy-the-dip move which pared much of the losses sustained on Thursday.
NZD/USD Technical
- 0.6752 was tested on Thursday and is the first line of resistance. Above there is resistance at 0.6889
- 0.6615 is providing support, followed by 0.6536
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