NZ Dollar Down Despite Upbeat RBNZ, Yen Up as Abe Teeters

TALKING POINTS – NZ DOLLAR, JAPANESE YEN, US RETAIL SALES

• NZ Dollar down despite supportive comments from RBNZ’s Orr
• Japanese Yen up as scandals threaten PM Abe’s economic policy
• US Dollar may face pressure if retail sales statistics disappoint

The New Zealand Dollarnarrowly underperformed in otherwise quiet Asia Pacific trade. The selloff appeared to echo an upward gap in US Treasury bond yields at the weekly trading open as markets shrugged off weekend geopolitical jitters. Firming risk appetite corresponds to a world view wherein the Fed has scope for further rate hikes, pushing the Kiwi off its perch as the highest-yielding of the G10 FX majors.

Seemingly supportive comments from newly-installed RBNZ Governor Adrian Orr did not offer a reprieve. He told NewstalkZB radio over the weekend that that the central bank’s forthcoming pivot to a dual-mandate policy framework will not divert its attention away from price stability. Orr added that the economy is “near full employment”, which might have been interpreted as boosting near-term tightening chances.

The Japanese Yen traded higher after a Nippon TV poll released on Sunday gave Prime Minister Shinzo Abe an approval rating of just 26.7 percent, the lowest on record. This compounded the sense that his economic program – including hallmark support for ultra-loose BOJ monetary policy – might be in jeopardy. Thousands of protesters gathered outside Parliament to call for Abe to resign over the weekend after recent scandals.

Looking ahead, a tame offering on the European data docket may see investors looking ahead to US retail sales figures due later in the day. They are expected to show receipts grew 0.4 percent in March, marking the first increase in four months. US news-flow has increasingly stumbled relative to forecasts recently however, opening the door for a downside surprise that may apply a degree of pressure on the US Dollar.

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

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