NZD/USD flirts with 0.6200 amid modest USD strength, downside seems cushioned – by hareshmenghani NZDUSD Fed Bonds RiskAppetite Currencies
ssive day on Tuesday. The corrective decline remains uninterrupted through the early European session, with bears now awaiting a sustained weakness below the 0.6200 round-figure mark before placing fresh bets.
The US Dollar regains some positive traction and snaps a three-day losing streak to its lowest level since February 14, which, in turn, is seen exerting downward pressure on the NZD/USD pair. That said, a fresh leg down in the US Treasury bond yields, amid diminishing odds for a more aggressive policy tightening by the Federal Reserve , could act as a headwind for the buck. Apart from this, a generally positive risk tone could help limit losses for the risk-sensitive Kiwi, at least for now.
The collapse of two mid-size US banks - Silicon Valley Bank and Signature Bank - fueled speculations that the US central bank will soften its hawkish stance to prevent any further economic pressure from high-interest rates. In fact, the markets are pricing in a greater chance of a smaller 25 bps lift-off in March and that themight even cut rates during the second half of the year.
Meanwhile, the news that UBS will rescue Credit Suisse in a $3.24 billion deal helps ease fears of widespread contagion risk and boosts investors' confidence. This is evident from a further recovery in the global equity markets, which tends to undermine traditional safe-haven assets and might further contribute to capping the buck. Market participants, however, remain worried about a full-blown banking crisis.
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