- Wall Street posted the biggest daily loss since the 1987 crash.
- US dollar jumped across the board, NZD/USD dropped 2.30%
The NZD/USD tumbled top 0.6087 reaching the lowest intraday level since Monday. It then bounced modestly and it ended around 0.6120, the weakest close since 2009.
Another dramatic sell-off in Wall Street, even worst than Monday’s weighed on commodity and emerging market currencies. The greenback was the best performer, boosted by intense risk aversion and higher US yields.
The Dow Jones lost almost 10% and the S&P 500 9.5%. The wild ride in markets started after US President Trump imposed a 30-day travel ban from Europe. Now events, sports tournaments, meetings, travels, etcetera are being canceled in all continents. The economic outlook worsened dramatically over the last few days, triggering panic among investors.
“A health crisis has morphed quickly into the most synchronised economic shock imaginable, with financial markets now battling it out for the headlines as well. Overnight the ECB stepped up purchases, the US Fed injected sizeable liquidity, and the market is also expecting the FOMC to deliver the remaining 100bp of cuts in short order. Here, the RBNZ has argued that they have plenty of time to think through their response, but with developments rapidly escalating on the global health, economic and financial fronts simultaneously, that seems optimistic”, explained ANZ analysts.
Volatility is likely to remain at extreme levels, favoring sharp moves in NZD/USD either down or up. On the flip side, the 0.6100 is the immediate support followed by 0.6040. On the upside, the 0.6180/0.6200 is the resistance band to break.