NZD/USD: Negative outlook for the kiwi – CIBC

Analysts at CIBC, forecast the NZD/USD pair will trade around 0.64 during the fourth quarter and at 0.63 during the first one of next year. They point that the kiwi weakened amid negative bond yields in New Zealand. 

Key Quotes: 

“During the last month, New Zealand 2-year bond yields have fallen from around 10bps to current -5bps, while the NZD has been amongst the weaker currencies against the USD, off by 2.7% in the period. The reversion to weakness from previous steady performance came after a period of relative strength of the NZD, which was underpinned by then USD weakness and a moderate recovery out of virus lockdowns encouraging buyers."

“Like its Tasman neighbour, the New Zealand economy is facing economic headwinds from projected higher unemployment and the ending of a number of government support schemes. Our outlook for the NZD into the end of the year and introduction of negative cash rates, potentially in 1Q, is for further weakness against the USD and on major crosses, including JPY and CAD.”

“That NZ yields have already fallen to reflect broad expectation the RBNZ will deliver additional monetary accommodation in the months ahead, suggests the pace of NZD weakness may moderate from present levels. Still, previous RBNZ suggestion of potentially buying foreign assets – akin to intervention, will remain a cap against gains.”