The New Zealand Dollar was broadly lower during Wednesday’s Asian trading session after the head of the Reserve Bank of New Zealand cautioned FX traders that it might be compelled to intervene in the too strong currency given worsening fundamentals. A currency that appreciates too quickly can negatively affect the economy, especially one which is reliant on the price of its exports. Despite the fall, which was no more than a knee-jerk reaction to RBNZ governor Wheeler’s comments, the Kiwi remained close to a 2½ year peak against its U.S. rival, highlighting the need for possible intervention.
As reported at 11:55 a.m. (JST) in Tokyo, following Wheeler’s interventionist comments, the NZD/USD traded lower, falling to $0.8691 at one point from a previous session high of $0.8770. Despite the fall, in the overnight hours the pair remained close to the multi-year peak of $0.8779 as pressure on the U.S. Dollar increased.
Dollar Index Breaks away from Range
In the United States, the U.S. Dollar Index, which is viewed by FX traders as an effective measure of the greenback’s relative strength, fell to a 6-month trough breaking out of the recently embedded trading range. Analysts attribute the fall to a drop in U.S. Treasury yields as investors contemplate the possibility that the Fed will not be raising interest rates anytime soon, despite clear signs of an improving and stabilizing economy.