NZD/USD can test up as high as 0.70 – ANZ

A combination of better domestic fundamentals, strong virus management and a weaker USD have helped propel the NZD to 2020 highs. Despite the strong performance, there are some potential headwinds over the next month, therefore, economists at ANZ Bank expect the kiwi to trade in the range of 0.65 though spikes toward 0.70 are not ruled out.

Key quotes

“August is the low point in the season for New Zealand export returns. Dairy volumes are down as very little milk is produced in June/July and meat exports are affected by low inventory levels. This makes August a seasonally poor month for the currency.” 

“A commitment to suppressing yields and expanding QE will diminish some of the NZD’s appeal, particularly against the AUD. We expect the RBNZ will increase the Large-Scale Asset Purchase Programme limit to $90 billion in August and signal willingness to do even more through other tools.” 

“These influences are likely to act as only as a moderating force against the broader, liquidity-driven portfolio flows which are supporting risky assets like the NZD. This leaves our forecast trajectory for the NZD mostly flat, with the expectation NZD/USD will range-trade around our fair value estimate of 0.65, but can test up as high as 0.70.”