USD blasted higher. The move was centred on USD/JPY, but all of the major currencies were affected. As a result, the NZD/USD finished the week 2.8% lower around 0.8300. Importantly, at least part of last week’s USD rally was driven by ‘fundamentals’, as US bond yields marched higher. Elements of last week’s NZD/USD selloff bear a striking resemblance to the three cent decline between February and March. The speculative community have been the main sellers, as previously ‘extreme’ long positioning is adjusted. At the same time, local exporters have enthusiastically scooped the dip to rebuild currency hedges. According to our Currency Flows Monitor, net NZD flows were in the 90th percentile last week, with above average flows recorded for all of the NZD crosses.
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