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Japanese Yen Surges vs New Zealand Dollar After RBNZ, Fed Rate Cuts

Japanese Yen Surges vs New Zealand Dollar After RBNZ, Fed Rate Cuts

Dimitri Zabelin, Analyst

New Zealand Dollar, Japanese Yen, RBNZ, FOMC, Fed Cuts Rates to Zero, QE – TALKING POINTS

  • Japanese Yen surges vs New Zealand Dollar after RBNZ slashed interest rates
  • NZD/JPY selloff amplified after Fed cut interest rates to zero and launched QE
  • New Zealand Dollar may continue to suffer vs Japanese Yen on Covid-19 panic


The cycle-sensitive New Zealand Dollar plunged against its G10 counterparts but with particular ferocity vs the anti-risk Japanese Yen. This came after the Reserve Bank of New Zealand (RBNZ) delivered an emergency 75 basis point rate cut over the weekend amid the coronavirus pandemic. This caught markets off-guard who were previously believed the central bank would take a more wait-and-see approach to policy.

These stimulus measures brought the Overnight Cash Rate (OCR) to an all-time low at 0.25 percent in an effort mitigate the economic disruption of Covid-19. New Zealand’s economy is particularly susceptible to global disruptions due to its export-oriented growth model. This vulnerability is amplified by the fact that China – the epicenter of the coronavirus outbreak – is also a leading source of New Zealand’s external demand.


As outlined in my prior piece, Federal Reserve announced on Sunday that it cut the benchmark Fed Funds interest rate to 0.00-0.25 percent. Additionally, monetary authorities announced a $700 billion quantitative easing program (QE) as a way to calm interbank stress with an objective of financial re-stabilization. Fed Chairman Jerome Powell subsequently held an audio-only press conference to expand on the decision.

In the call, he warned that the coronavirus is having a profound impact on people all over the world. The measures taken by schools and businesses to mitigate the contagion are likely to negatively impact the US economy in the near term and will hit vulnerable industries like tourism and travel the hardest. Mr. Powell also noted that financial markets have shown signs of stress and tightened credit conditions amid a panic-induced selloff.

He said the bond purchasing program will foster more accommodative financial conditions alongside its coordinated effort to reduce the cost of US Dollar swap lines with major central banks. When questioned on negative interest rates, the Chair said he does not see sub-zero interest rates as an appropriate policy here in the US. He also noted that the FOMC will not hold its planned meeting this week on Wednesday.

To see more of his comments, be sure to follow me on Twitter @ZabelinDimitri.


Despite the proverbial bazooka of easing Mr. Powell fired into the markets, risk aversion gripped investors and amplified NZD/JPY’s losses. The pair is currently trading at a four-year low as part of a broad selloff it faced after it broke the October uptrend earlier this year (red parallel channel). NZD/JPY is now hovering in a support range between 63.630 and 64.216 (gold-dotted lines).

NZD/JPY – Daily Chart

Chart showing NZD/JPY

NZD/JPY chart created using TradingView

If the lower tier is broken with follow-through, it could further pressure the pair as it continues to trade below a five-year descending resistance channel. The monthly chart shows NZD/JPY has attempted but failed to clear the ceiling on several occasions and is now heading for a range not reached since 2008. Selling pressure here may abate, but given the fundamental circumstances, the path of least resistance leads downward.

NZD/JPY – Monthly Chart

Chart showing NZD/JPY

NZD/JPY chart created using TradingView


--- Written by Dimitri Zabelin, Jr Currency Analyst for

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.