Kiwi Paces Rally Versus Dollar; Euro Volatility Soars Before ECB

  • NZD bought by momentum and real money funds as Wheeler ‘done’
  • EUR/USD hovers around 1.08 amid options-related selling

Commerzbank's Kraemer: ECB to Extend QE by Six Months

The kiwi paced gains in developed-market currencies after Reserve Bank of New Zealand Governor Graeme Wheeler said he was probably finished cutting interest rates. The dollar weakened against its major peers following a decline in Treasury yields on Wednesday.

New Zealand’s dollar gained as much as 0.8 percent versus the greenback to test its 100-day moving average on buying by momentum and real money funds. EUR/USD overnight volatility soared to the highest since June on speculation the European Central Bank will shed light on whether it plans to extend its bond-buying program at a policy meeting Thursday. The euro rose toward resistance at $1.08 where it met with options-related barriers, while ex-Asia funds soaked up selling under $1.077.

  • EUR/USD climbs toward 1.0800, an area which covers a series of lows in December 2015 and January 2016; large selling ahead of 1.0800 option strikes is largely based on barrier knockouts expiring Thursday and Friday, Asia-based FX trader says; see ECB Preview
  • NZD/USD surges for second day after Wheeler said rates are probably low enough to return inflation to 2% goal amid robust economic expansion. Government raises its 2016/17 GDP forecast to 3.5% from 3.3%, and 2017/18 forecast to 3.4% from 3%
  • AUD/NZD selling by macro funds has brought retest of 1.0365 November low into play, Asia-based FX trader says
  • USD/JPY extends decline and the fall may have been triggered by position adjustment from investors and traders with dollar longs, BOA says; Asia-based FX trader said selling from leveraged funds were largely long liquidation with bids under 113 dominated by Tokyo-based trust banks
  • GBP/USD remains in consolidation phase below 100-DMA resistance
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