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04/09/24
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NZD Continues Decline Amid Investor Caution and Economic Data Anticipation
The New Zealand Dollar (NZD) continues to experience a decline against the US Dollar (USD), having extended its losing streak to four consecutive days. As of Wednesday morning, the NZD/USD pair trades around 0.6180. This ongoing devaluation can be attributed to a cautious sentiment among investors ahead of significant economic data slated for release later in the week, such as the ISM Services Purchasing Managers’ Index and Nonfarm Payrolls. These reports are anticipated to provide insight into the magnitude of a potential interest rate cut by the Federal Reserve this month.
Meanwhile, the USD has encountered some depreciation due to falling US Treasury yields. Currently, the yields on 2-year and 10-year US Treasury bonds are recorded at 3.86% and 3.83%, respectively. In contrast, the Greenback received a temporary boost from the recent ISM Manufacturing PMI report, which showed a slight uptick from 46.8 in July to 47.2 in August, although this still fell short of analysts’ expectations. Notably, this marks a continued contraction in US manufacturing activity, with 21 months of declines over the past 22 months.
The NZD’s weakness is further compounded by declining economic indicators from China, particularly the Services Purchasing Managers’ Index (PMI), which dropped from 52.1 in July to 51.6 in August. Given China’s significant trade relationship with New Zealand, this decrease casts additional pressure on the NZD.
In related economic news, Bank of America has revised its economic growth forecast for China, now predicting a growth rate of 4.8% for 2024, slightly down from a prior estimate of 5.0%. The outlook for 2025 remains at 4.5%, consistent with earlier estimations, while projections for 2026 have not changed.
On a more positive note, New Zealand’s ANZ Commodity Price Index showed a 2.1% increase in August, rebounding from a 1.7% decline the previous month. However, there are concerns regarding New Zealand’s current account deficit, which is viewed as a critical factor for economic stability moving forward.
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