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Three-day Lockdown Causes a Slide of Currency in New Zealand

New Zealand has been clean from Coronavirus cases since February until an Auckland man tested positive for Covid-19. This single case of the virus resulted in the three-day lockdown for the whole country because the prime minister of New Zealand, Jacinda Arden perceived it as the threat of a massive explosion of Coronavirus. She announced the nationwide restrictions which means that the businesses, offices, and schools have to close for three days, and Auckland, where the infection broke out, and Coromandel Peninsula will remain under lockdown for at least seven days.

At a news conference, Arden assured New Zealand that the government has planned for this eventuality and their early hard work has not been in vain. She also said that some people may not be happy with the harsh restrictions for just a single case, but other countries have shown their dire consequences of talking too long before the actual actions.

The New Zealand Dollar has tumbled because of those actions. The information about the Covid 19 case became known a day earlier than a policy announcement by the RBNZ. The bank was expected to become the first central bank of the developed world to raise the interest rate since the beginning of the Pandemic.

Current events of the county were important for the currency trading brokers in New Zealand as well. Traders’ response to the events was to rein in bets on monetary tightening by the RBNZ, denting the currency that has been buoyed in past weeks by the central bank’s hawkish actions.

Before the announcement of the Covid case in Auckland, It was fully priced that the Markets are pricing in a 75% chance of interest rates rising to 0.5% on Wednesday. Derek Halpenny, who is the head of research for global markets at MUFG said that he assumes that they will still go for it, but caveats their decision with far more cautious guidance about future events.

The New Zealand dollar slipped 1.3% per cent to $0.693, as its biggest daily fall since May took it close to a nine-month low. Kit Juckes, who is the macro strategist at Société Générale said that if a lockdown works, they will probably be back to where they were, but in the worst-case scenario, if it is the Delta variant and the country finds it hard to handle it, you do not need to be an expert to know that everything will change in terms of the outlook from the Reserve Bank of New Zealand.

The setback in New Zealand has not properly scored the remaining threat caused by the coronavirus to efforts to withdraw stimulus measures instituted to fight the pandemic.

The Australian dollar also dropped after the central bank of the country published an influencing set of minutes from its last policy meeting on Tuesday. These minutes have shown that the Reserve Bank of Australia was prepared to act if there was a need for new lockdowns that threaten the recovery of the economy, but the fact is that their national currency fell to its lowest level since November of 2020.

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