NZD: Riding the waves

Analysts at Westpac suggest that New Zealand’s economic fundamentals look very attractive against the lacklustre global backdrop which has seen the NZD retrace its late-2016 decline against the US dollar and they expect it will remain well supported for the next few months.

Key Quotes

“The kiwi is expected to lose some altitude over 2018 as growth here starts to ease off.”

“It’s been a bumpy few months for the New Zealand dollar, with the Kiwi continuing to be buffeted by global forces. The strongest of these have emanated from the US. In the wake of Donald Trump’s election to the presidency, his initial consolatory tone and plans to boost fiscal spending were greeted positively. We also saw the Fed hike the funds rate in December, and market expectations for future hikes being brought forward. These developments gave the US dollar a shot in the arm, and saw the NZD/USD fall by around 7% through late-2016.”

“However, since entering office, sentiment towards the new president has soured in some quarters. And combined with a lack of detail around policy, the US dollar has come under downwards pressure.”

“At the same time, the New Zealand economy has continued to look like a standout. GDP growth has been firm. Dairy prices have held on to most of their gains from the past year. And inflation has finally picked up. We still think it’ll be some time before the Official Cash Rate starts to rise. But with New Zealand’s economic fundamentals looking rosy against a still lacklustre global backdrop, the Kiwi has been well supported. In early 2017 the NZD/USD has picked up, retracing most of the decline we saw in late 2016. We expect that it will linger around 71 cents through the first half of 2017.”

“We expect the Fed to hike the funds rate twice this year, with a continued gradual tightening further ahead. At the same time, the RBNZ is expected to stand pat. These conditions should see the NZD/USD ease back through 2017, before heading down towards the mid-60s through 2018 as growth in New Zealand eases back.”

Share: Feed news

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. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.