NZD: Backdrop should start to improve - TDS

Sandeep Kanihama FXStreet Contributor

The kiwi has been the worst performing G10 currency over the past three months, dropping over 3% which reflects a mix of both internal and external headwinds, though analysts at TD Securities think the backdrop should start to improve.

Key Quotes

“It is a tactical view but we think both AUD and NZD should outperform CAD (for example) over the next few weeks.”

“The economy is in good shape and a rate cut is unnecessary, while the external risk premium could start to fade. That really boils down to the fact that a lot of bad news is already well-priced into the currency (also the case for other high-beta G10 currencies). Against our HFFV gauge, NZDUSD is trading near short-term fair value.”

“Notably, fair value has corrected towards spot over the past few weeks, leaving NZD with little risk premium. A better risk backdrop would favour a weaker USD, suggesting a run towards $US0.68 for NZD in the event of a full blown correction in positioning.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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