The NZD/USD continues to swing a tight range around the0.8700 level, with surprisingly little downside traction madein a negative risk environment. The combination of an alleged shooting-down of a jetliner,an Israeli ground operation in Gaza, and the possibility of abond default in China would normally see the NZD sold offsignificantly. The VIX Index of volatility has surged from11.5 to 14.8 overnight, hitting its highest level since April. Inour modelling framework, based on 10 years of historicalrelationships, a spike in VIX of this magnitude should beenough to take 1.0 to 1.5 cents off NZD/USD.
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