NZD Loses Ground Against USD as Coronavirus Cases Surge

Ibeth Rivero

New Zealand is now amid the resurgence of the Covid-19 pandemic. 

So far this week, the New Zealand dollar has lost 0.90 percent against the greenback, losing ground for the third consecutive week and in light of the recent recovery of the later. Conversely, it has dropped 0.45 percent against the Australian Dollar.

The dollar managed to advance last week after six consecutive weeks of losses, gaining 0.09 percent against a bundle of its main competitors. This week the dollar has gained 0.18 percent, which is the second consecutive week of gains.

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The late enthusiasm for the dollar could be linked to the recently released employment report, which showed that the unemployment rate stood at 10.2 percent, better than the analysts' expectations who foresaw it to be at 10.5 percent. Conversely, July's nonfarm payrolls went up more than expected, standing at 1.76 million instead of 1.53 million. US President Donald Trump also decided to sign an executive action that attempts to guarantee a $400 extra unemployment aid, as well as protect the American citizens against evictions, deferring student loans, and suspending payroll taxes.

Coronavirus New Zealand is now amid the resurgence of the Covid-19 pandemic. Recently, Auckland reported the first locally transmitted case in 102 days, which pushed the government to reimpose level-three restrictions for three days in the city. This means that bars, restaurants, and non-essential businesses will have to close down and that Auckland residents will only be allowed to leave their homes to do essential activities. Gatherings over 10 individuals will be forbidden as well. Regarding the rest of the country, they will have to comply with level 2 restrictions, which forbids gatherings over 100 individuals and social distance measures will be enforced.

The Prime Minister, Jacinda Ardern commented today that the general elections, which are set to take place on September 19,  could be delayed if the outbreak is not contained.

"We're seeking advice from the Electoral Commission, just so that we make sure we have all options open to us," she commented, "No decisions yet, as you can imagine, have been made," she added.

At the moment there are 1,570 confirmed coronavirus cases on the island, as well as a death toll of 22. This turns New Zealand in one of the most successful countries in terms of managing the pandemic, compared to its close neighbor Australia, which has 22,127 confirmed cases and 352 total deaths.

In terms of the economic calendar, ANZ released its preliminary business confidence figure on Monday, which stood at -42.4 in August after being at -31.8 during the previous month. The Activity Outlook stood at -17 percent, after being at -8.9 percent in the previous month. Statistics New Zealand released its electronic card retail sales figure, which increased by 1.1 percent (month-to-month) on July, after going up by 15.6  percent on the previous month. The yearly figure advanced by 11.4 percent, after being at 8 percent on the previous month.

On Tuesday, Statistics New Zealand reported that the number of visitors to New Zealand went down by 98.4 percent in June, after falling 99 percent on the previous month.

Today the Reserve Bank of New Zealand announced its decision to leave the cash rates unchanged at 0.25 percent, remaining in line with the analysts’ expectations.

The bank also announced its decision to expand its bond purchasing program from NZ$60 billion to NZ$100 billion, as well as expressing its eagerness to employ a package of additional monetary tools, among them the possibility of setting the cash rate below zero and providing low-cost funding to the banking sector, depending on inflation and employment levels. This is remarkable given that the bank said previously that a negative interest rate could not be implemented given that some banks' operating systems could not cope with it, though instructing them to get their systems ready for that.

Ibeth Rivero

Ibeth contributes daily market commentary in both English and Spanish (both of which she speaks fluently) and she also manages the DailyForex mobile app to ensure that traders around the world are getting important market updates in real time.

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