NZD Review and 2019 Outlook
2018 Review
The NZD showed mixed performance through 2018, weakening against the USD and JPY and outperforming the other key commodity currencies, AUD and CAD. Performance of the NZD on EUR, GBP, and CNY crosses depends on measurement. Taking the spot rate as at the end of 2018 and 2017, the NZD showed little movement. Using December month averages, the NZD ended up stronger on these crosses.
NZD Corporate FX Update
The NZD showed a strong recovery in November, breaking its prior six-month downward trend. Over recent weeks it has been trading slightly rich compared to our short-term fair value model estimate, which has hovered around 0.66-0.67.
NZD/AUD to sustain a higher range
In our early October FX forecast update, we had the AUD falling back to 0.71 and NZD to 0.65 by year end, on the premise that the US would press ahead with lifting the tariff rate on $200bn worth of Chinese imports to 25% from Jan 1st and confirm it was extending tariffs early in 2019 to the whole gamut of Chinese imports.
NZD Recovers, Now What?
The NZD has been the best performing major developed currency over the past month. After reaching a multi-year low of 0.6425 in early October, a strong rally has seen it rise to as high as 0.6884, a level not seen since June.
NZD Corporate FX Update
Our forecasts show the NZD hovering around 0.65 through the next six months, but we aren’t confident enough to declare the downward trend of the past six months over. Much bad news is priced in but the global macro backdrop is challenging.