Talking Points:

  • New Zealand Dollar sinks as RBNZ policymakers threaten to intervene
  • US Dollar may rise if upbeat PPI data fuels hopes for inflation pickup
  • What will drive longer-term FX market trends? See our forecasts here

The New Zealand Dollar underperformed in Asian trade after RBNZ policymakers threatened to intervene in FX markets to weaken it. Governor Graeme Wheeler said the option to step in is “always open”, adding that the central bank has intervened in the past and is “always assessing” if doing so is appropriate again.

Assistant Governor John McDermott echoed Wheeler’s remarks. He said that officials pointedly dialed up their rhetoric about the exchange rate – saying the Kiwi “needs” to adjust lower – to signal a “first step toward possible intervention”.

The Japanese Yen traded broadly higher as sentiment soured across regional bourses, boosting the perennially anti-risk currency. The MSCI Asia Pacific benchmark stock index slid 0.6 percent in a move the newswires chalked up to continued worries about escalating tensions between the US and North Korea.

From here, a relatively quiet day on the European data docket may see investors looking ahead to July’s US PPI report. An uptick in wholesale inflation is expected to put the on-year rate at 2.1 percent, matching the three-year high established in May.

US economic news-flow has steadily improved relative to consensus forecasts since mid-June, opening the door for an upside surprise. Such an outcome may drive speculation of a likewise strong result when the much-anticipated CPI price growth measure prints on Friday, boosting the US Dollar.

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Asia Session

US Dollar May Rise on PPI Data, RBNZ Threatens FX Intervention

European Session

US Dollar May Rise on PPI Data, RBNZ Threatens FX Intervention

** All times listed in GMT. See the full DailyFX economic calendar here.

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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