NZD/USD to drift higher on a more sustainable basis later in the year – MUFG
|During May, the New Zealand dollar appreciated modestly against the US dollar from 0.6473 to 0.6502. Economists at MUFG Bank expect the kiwi to strengthen on a more sustainable basis later in the year.
Aggressive tightening well priced so only moderate gains ahead
“The hawkish action from the RBNZ should help limit further declines from here although some renewed selling seems plausible to us given financial conditions could tighten again.”
“The RBNZ now predicts the policy rate reaching 3.25% this year and 3.95% by Q3 2023. That guidance is now more than fully priced suggesting the upside for short-term yields in New Zealand is now limited.”
“If financial conditions continue to tighten, the RBNZ is unlikely to deliver what is currently priced. However, the Fed will also not deliver what is priced and assuming China downside risks recede later in the year and risk aversion recedes then NZD/USD can drift higher on a more sustainable basis.”
“New Zealand’s terms of trade should also provide support. Food prices are set to rise and food makes up a large portion of New Zealand’s key exports. New Zealand is also planning to increase wheat production in order to benefit from global shortages”.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.