The euro fell to a five-week low on Wednesday. The prospects for peace in Ukraine seem to have darkened; Kiwi exploded after the New Zealand central bank announced its sharpest rate hike in two decades to stem inflation. Although the 50 basis point increase by the Reserve Bank of New Zealand was more significant than many economists expected, this was within the traders’ expectations. Policymakers have mitigated this move by not canceling out the estimated peak rates.
The Bank of Canada will meet later Wednesday. It should also reach its sharpest growth since 2000. Policymakers around the world will begin efforts to curb rising prices. The kiwi traded up $0.6902 after the New Zealand Reserve Bank lifted the official monetary rate to 1.5%.
The currency retreated around the 200-day moving average. The latter was almost 1.5%, down to its daily high of $0.6811. The central bank viewed its actions without changing its perspective. Analysts say currency support may be short-lived. This is a kind of 50-point hike. They say this is just a growth move, and the RBNZ has not changed its view on the OCR perspective since the February announcement. He also noted that the market has a much sharper peak rate forecast than the central bank.
Euro and Ukraine Hopes
Elsewhere, traders were not worried about slightly tightening the tongues of Japanese officials about the rapidly weakening yen. The currency was under significant pressure at $125.60, breaking the critical support level of 125.86. The finance minister said the government was watching the currency movement with a sense of urgency.
The yen rested for a minute overnight when cooler-than-expected US data showed that bonds had risen. Investors were hoping that price pressures might reach a peak. The second consecutive monthly decline in used car prices kept the core CPI up 0.3% in March, against an expected 0.5% increase. However, since core annual inflation is still around 8.5% and rapid rate hikes are still likely, that was not enough to oust investors from the dollar.
The Russian president’s description of the “stalemate” in the peace talks on Tuesday also weighed heavily on the euro and sterling. They, too, are vulnerable to the economic consequences of war. The euro fell to $1.0821 overnight and $1.0835 during the Asian session. Sterling, fixed at $1.30, is maintained at $1.3001. The Australian dollar and Chinese yuan also weakened slightly after a sudden drop in Chinese imports. This added to investors’ concerns about weakening demand.
Dollar-denominated imports fell 0.1%. This was the first decline since August 2020, against the expectation of 8% growth. The Australian exchange rate fell 0.1% to $0.7445. The yuan fell slightly lower after the data; however, it remained stable during the day at $6.3661.
The Canadian dollar traded at a 200-day moving average in Asia at $1.2614 C; However, traders were nervous before the Bank of Canada meeting, especially since the market is slightly shorter in USD/CAD. It will make policy decisions in Singapore and Europe over the weekend.