NZD/USD reaches a fresh YTD low at around 0.6035 on risk aversion

• NZD/USD creeps lower to fresh 2022 lows at around the 0.6030s region.
• The US ISM Non-Manufacturing PMI for August exceeded forecasts, surprising market players.
• ANZ Analysts on the NZD/USD: Hard to stand in front of the US dollar train.

The NZD/USD dives from weekly highs at 0.6128 due to worries that the US Federal Reserve would likely continue to tighten monetary policy aggressively after August ISM Manufacturing and Non-Manufacturing readings remained in expansionary territory, with better-than-expected figures.

The New Zealand dollar opened at around 0.6100 before advancing sharply toward the day’s highs. Nevertheless, as market sentiment turned sour, the greenback strengthened, as shown by the NZD/USD tumbling towards the daily lows at around 0.6035. At the time of writing, the NZD/USD is trading at 0.6040, below its opening price.

NZD/USD drops after US ISM Services PMI expanded more than estimates

Earlier in the North American session, the US Institute for Supply Management revealed that the Non-Manufacturing PMI for August expanded by 56.9, exceeding forecasts of 54.9 while peaking at July’s 56.9 reading. Furthermore, New Orders increased to 61.8, more than 59.9 in July, while Prices Paid slowed to 71.5 from 72.3, signaling that higher interest rates are beginning to affect the economy.

So far, US economic data released throughout September further cements the case for a 75 bps rate hike. As reported by the ISM, US factory and services activity continued expanding, and the Nonfarm Payrolls, exceeding estimates, paint a solid economic outlook for the US. The last piece of the puzzle would be the Consumer Price Index (CPI), to be released next week.

Meanwhile, the US Dollar Index, a gauge of the buck’s value, is up by 0.60%, at 110.263, hitting a fresh 20-year high during the session, underpinned by the rise in US T-bond yields. The US 10´-year benchmark note rate sits at 3.351%, up by 13 bps.

An absent New Zealand economic docket would leave NZD/USD traders adrift to US dollar dynamics, alongside Cleveland’s Fed Loretta Mester speech on Wednesday.

ANZ Analysts on the NZD/USD: Hard to stand in front of the US dollar train

Analysts of ANZ bank, in a note to clients, wrote: “Markets remain highly focussed on offshore factors, and while NZ interest rates here will rise in broad unison with their US counterparts, the USD’s dominance will just keep piling pressure in inflation here, which in turn speaks to a firmer policy response and more pain. Bottom line – it’s hard to stand in front of the US dollar train at the moment.”

NZD/USD Key Technical Levels