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FX Update

A range of major currencies continue to operate around multi year lows, some multi decade lows with investors scrambling for the safe haven US Dollar. The Australian Dollar was recently at an 18 year low.  

The Reserve Bank of New Zealand will buy NZ 30 Billion in government bonds over the following 12 months (QE program) in efforts to keep interest rates low as the coronavirus impacts the local economy. As the pandemic worsens risk aversion has resulted in stricter credit conditions and reduced the impact of recent interest rate cuts. The RBNZ has changed its mind for the time being on delivering negative rates. While we could still see rates at zero, the plan with QE now is a good one in which we should see increased liquidity/cash flow back into the economy. Jacinda Ardern announced alert level 3 yesterday moving to alert level 4 on Wednesday – Alert level 4 will remain in place for about 4 weeks. Infected cases increased to 102 Monday and to 155 today. Only essential businesses will remain open. The govt will raise the cap on its wage subsidy scheme which will inject a further $4Billion onto the economy over the next 11 weeks. There is an agreement with banks to provide support for people with mortgages and a business finance scheme for businesses for those impacted by covid-19, details of what this looks like will be announced over the coming weeks.  

Death rates continue to publish scary numbers and the health systems are well overloaded in Spain and Italy. More measures will come into place to self-isolate and more borders will close around the world. Japan’s Abe said they are looking at postponing the Olympics – very sad but it must be done as the safety of people cannot be guaranteed.

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