NZD Corporate FX Update
Near-term headwinds for the NZD have re-emerged and volatility could rise into year-end.
Following the strong rally in the NZD in May, from an oversold level, headwinds have re-emerged over the past couple of weeks. At the end of last week, our global risk appetite index had fallen to just over 60%, quite a tumble from the risk-loving 85% peak in May. To explain this, we might point to weaker US economic data, renewed concerns about China’s growth outlook and geopolitical factors, following Trump’s rise in the polls and becoming a clear favourite to become the next US President. Adding to the NZD’s pullback was the surprising dovish pivot by the RBNZ at its July policy review.
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NZD Corporate FX Update
Despite the strong recovery in the NZD it remains “cheap” and we maintain a positive outlook
After falling through the first four months of the year, the NZD staged a strong 4½% recovery in May and has extended gains into early June, to reach a three-month high just over 0.62. There have been multiple driving forces and, despite the strong recovery, the NZD remains fundamentally cheap against our short-term fair value model estimate, which has been hovering around 0.67 through most of 2024.
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NZD Corporate FX Update
The NZD continues to languish near 0.60. Our April forecast revision with a target of 0.60 by end-June allowed for the trading range to extend down to as low as 0.58 but, so far, the intraday low has been 0.5852.
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