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Kiwi Slides Further | US Dollars in Demand

Published March 18, 2020

The Kiwi Dollar opens the day sharply lower as the US Dollar surged with investors looking for liquidity amid falling asset prices. US Dollars are is short supply pushing the currency higher, which has seen both the NZD and AUD fall below the 60 cent level. The NZD is lower on all major cross rates apart from the NZD/AUD which has continued its recent run towards parity. Overseas, attention is now moving from monetary policy and rate cuts, towards fiscal support measures, with the U.S expected to outline their plan later today.

NZ Government Delivers Fiscal Boost

The Kiwi Dollar received an initial boost after yesterdays $12.1 billion fiscal support package. The package is equal to around 4% of GDP and includes immediate wage subsidies, business tax relief, support for the aviation industry, increased benefit payments, and a $500 million cash injection to the health sector. The boost to the currency was short lived with the NZD giving back gains later in the day, before falling heavily overnight as the US Dollar rallied.

U.S to Announce Fiscal Support Plan

US Treasury Secretary Mnuchin said the US administration would outline its fiscal plan today, with press reports saying that it would be between $800b to $850b (4%/GDP), although it could yet grow larger.

U.S Retail Sales Slide

Data released overnight showed US retail sales unexpectedly fall in February, with households cutting back on purchases. The February number was down 0.5% vs January, compared to market expectations of a 0.2% rise. However the numbers are largely irrelevant given the coronavirus development of the past few weeks.