The New Zealand dollar firmed yesterday as investors await further developments on the COVID-19 crisis, particularly as new cases being reported as governments bolster their testing. The NZD traded at 0.4897 to the British pound, slowly dipping from the previous two days rates. As the market remains focused on the worldwide spread of the coronavirus, the risk sensitive currency has come under more pressure as relief from the disease looks unlikely. Since Tuesday, the number of coronavirus cases have rose from less than 91,000 in 76 countries to 98,422 in 90 countries. The death toll has risen from at least 3,125 to 3,385.
Central banks across the globe cut their rates, buoying NZD
This week saw the Reserve Bank of Australia cut its interest rate by 25 basis points to 0.50% from 0.75%. The Federal Reserve cut its funds rate by 50 basis points to between 1% and 1.25% from 1.75%, with Canada following suit with a 50-basis point cut from 1.75%. As a result of the global cash rate cuts, the NZ dollar has buoyed as the weakness in other major currencies has been put on display.
Pressure has mounted on the British central bank, the Bank of England who themselves have noted that action may be necessary in order to combat the coronavirus impact up ahead. Overnight, BoE governor Mark Carney mentioned that his bank was trying to estimate the likely impact of the virus on Britain’s economy. He was coordinating with the Treasury and international partners to deliver a “powerful and timely” response to the outbreak. Some in the market have tipped an emergency rate cut similar to that of the United States. Their rate cut came two weeks prior to their monetary policy meeting, and some think that the UK could follow suit.
NZD propped up by falling major currencies
Despite having a less than desirable run over the past few weeks, the NZ dollar has received a ‘propping up’ by the US Fed’s move this week to cut their rate by 50bps. The market notes that concerning the major currencies, it is a race to the bottom, but all currencies can’t fall at the same time. But the spread of the virus still threatens both domestic and global economies. The latest news in NZ is that the number of cases has reached four and that one of these individuals attended a concert last week when they may have been infectious.
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