The kiwi eases further on the day to its weakest level in nearly four years
Price has now fallen below the January 2016 low at 0.6348 to a session low of 0.6336. That represents the weakest level the pair has traded since September 2015.
The kiwi is partially weighed lower by a weaker yuan over the past two days but jawboning by RBNZ governor Orr earlier today isn’t helping with sentiment either. Further support below 0.6348 is only seen closer to the September 2015 lows around 0.6237-44.
I reckon a quick run below 0.6200 is when things can get a bit ugly for the pair towards the downside with the 2015 low @ 0.6130 to be eyed by sellers.
At the start of the month, the RBNZ already delivered a larger-than-expected rate cut (50 bps), dragging the OCR to an all-time low of 1.00%. Rightfully, it should give them some room to keep rates as it is before delivering another potentially big move down the road.
However, the RBNZ may not necessarily let up if conditions abide to that. There have been signals that they may adopt a more patient approach now but in a race to the bottom, they surely won’t hang around in the pit stop for too long.
I reckon the November meeting will be the key spot to watch so in the meantime, the central bank may look towards key data to guide their outlook.
As such, the dollar side of the equation will be the one of more focus with the Fed decision next month being the key factor amid the ongoing trade war.
The latter has been a bit of a welcome development for the RBNZ as China allowing the yuan to weaken has seen the kiwi soften as well, potentially boosting inflationary pressures.