NZD Update: Strong USD remains in charge
In early October we downgraded our outlook for the NZD, noting “headwinds galore”, including (i) the reasonable risk of US inflation proving less transitory than the Fed expects, leading to a bringing forward of rate hikes further into 2022, (ii) the global energy crisis which would hold back global growth, (iii) risks around China relating to its property market woes and its COVID19 elimination strategy, and a range of domestic factors. Our downwardly revised projection had a year-end target of USD0.69 and a relatively flat profile, consistent with a 0.67-0.72 range through to the middle of next year.
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NZD Corporate FX Update
NZD/USD was up about 4% in October, putting it near the top of its trading range since the middle of the year. A return of the global reflation trade and associated higher risk appetite was a key driver of the bounce-back, with higher NZ-global interest rate spreads a secondary force.
Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.
NZD/USD: Headwinds galore
’s fair to say that economics has been turned on its head over recent years, some glaring examples including lenders willing to pay for the privilege of handing over their money (negative interest rates) and folk willing to spend millions of dollars on digital pictures of rocks or apes.
Currency markets are similar in this regard, with relationships broken and movements not entirely making sense. The USD, which started the year as the most expensive currency against the majors we closely follow, has been one of the best performers this year, despite US CPI inflation at over 5%, the highest of any other major developed country.
Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.
NZD Corporate FX Update
After a mid-August dip, the NZD has recovered nicely and is back trading near the middle of its range seen so far this year.
Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.