NZD/JPY hits highest level since Nov 2021, visual test of 80.00 level as commodity exchange outperforms

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  • NZD/JPY hit its highest levels since November 2021 at 79.80 on Thursday, with commodity-linked currencies like the kiwi outperforming.
  • The kiwi benefited from higher commodity prices, which is positive for New Zealand’s terms of trade.
  • It looks like the 80.00 level might be here for the NZD/JPY in the next few days.

The NZD/JPY hit its highest levels since November 2021 at 79.80 on Thursday, with commodity-linked currencies like the kiwi (and Aussie and loonie) in demand following the recent price rally in across the commodity complex over the past few sessions, although commodities were mostly more subdued on Thursday. While risky assets (like global equities) have been under pressure and choppy in recent days amid stagflation fears following the Ukraine conflict that remain elevated, and while that may well have slowed the recent ascent of the NZD/JPY traders seem to be taking the more optimistic that rising commodity prices will be a net benefit for the kiwi. Higher commodity prices are certainly a plus for the terms of trade of net commodity exporters like New Zealand.

The Kiwi’s other view is that the RBNZ, concerned about already very high inflationary pressures in New Zealand, the historically tight labor market and high property prices, may well accelerate the pace of tightening. monetary policy in the coming months. This is putting upward pressure on long-term New Zealand government bond yields, drawing cash flow out of Japan, where long-term yields are low, close to zero, under policy control of the BoJ’s yield curve. It looks like the 80.00 level might be here for the NZD/JPY in the next few days.

As has been the case in recent weeks, any momentary risk-related weakness in the kiwi due to concerns over the war in Ukraine and its global economic impact will likely be seen as a downside buying opportunity by those who want to bet that the rise in commodities (also due to the Ukrainian crisis) will lift the NZD. If the NZD/JPY breaks above the 80.00 level, the next really important support zone is in the 82.25-82.50 area. Having already gained 2.5% for the month, it may take some time for the pair to rally even more than 3.0% in this zone.

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