NZD/USD to fly towards 0.78 over the next months – Westpac

The kiwi has found its wings in recent months, rising to a two-year high on a trade-weighted basis early in January. Over the coming year, economists at Westpac expect that the New Zealand dollar will gain further altitude relative to the US dollar and other major currencies. The kiwi is also expected to remain firm relative to the Australian dollar. 

Key quotes

“New Zealand will likely see a downturn in some key activity gauges due to the lack of international tourists during summer. Even so, we still expect that New Zealand will outperform others on the global stage. Against that backdrop, we see ample scope for the New Zealand dollar to push higher over the next few months and have pencilled in a peak of 0.78 against the US dollar in early 2022.”

“The New Zealand economy’s creditable performance will see the New Zealand dollar strengthening relative to both sterling and the euro over the course of 2021. The UK is continuing to struggle with rising infection numbers and a double-dip recession is looking likely. In the case of the euro area, measures to protect public health have been a drag on activity and inflation remains muted.”  

“We expect the New Zealand dollar will hold firm against the Aussie over the coming years, trading around 92 to 94 cents. Economic conditions across the ditch have improved by more than expected, and prices for Australia’s commodity exports have actually risen by more than those produced in New Zealand. However, the outlooks for monetary policy on the two sides of the Tasman have diverged. That will provide a floor under the NZD/AUD cross rate.”