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15 Dec 2014
NZD/USD may drop to 0.74 levels in 6-9 months – Rabobank
FXStreet (Barcelona) - Jane Foley, Senior Currency Strategist at Rabobank anticipates NZD/USD to drop to 0.74 levels on a 6-9month view on the back of softening economic climate, falling diary prices and a strong USD gains.
Key Quotes
“Since its July high NZD/USD has dropped over 12%. The fall partly reflects the broad-based strength of the USD during the second half of this year, but it is also a function of a deterioration in economic confidence in New Zealand which is itself a function of the sharp drop in diary prices.”
“The less buoyant economic climate for New Zealand is widely reflected across economic data releases. The release of Q3 GDP on December 17 is expected to show an expansion of 3.3% y/y, down from 3.9% y/y in the previous quarter. In tune with the moderation of economic activity the market has pushed back its expectation of the fifth RBNZ rate hike of the cycle.”
“Although the RBNZ’s statement was more hawkish than expected, the RBNZ maintained its commitment towards talking down the value of the NZD. Although this may not seem to be in tune with the Bank’s relatively hawkish position, the RBNZ is not averse to intervening on occasion in the FX market and this is likely to keep potential NZD cautious.”
“On the back of the softening in the economic climate in NZ, given concerns that diary prices could drop further and in view of our expectation of further broad based USD gains we expect further downside pressure on NZD/USD during 2015 towards 0.74 on a 6 to 9 mth view, though we expect a moderate outperformance of the NZD vs. the AUD. “
Key Quotes
“Since its July high NZD/USD has dropped over 12%. The fall partly reflects the broad-based strength of the USD during the second half of this year, but it is also a function of a deterioration in economic confidence in New Zealand which is itself a function of the sharp drop in diary prices.”
“The less buoyant economic climate for New Zealand is widely reflected across economic data releases. The release of Q3 GDP on December 17 is expected to show an expansion of 3.3% y/y, down from 3.9% y/y in the previous quarter. In tune with the moderation of economic activity the market has pushed back its expectation of the fifth RBNZ rate hike of the cycle.”
“Although the RBNZ’s statement was more hawkish than expected, the RBNZ maintained its commitment towards talking down the value of the NZD. Although this may not seem to be in tune with the Bank’s relatively hawkish position, the RBNZ is not averse to intervening on occasion in the FX market and this is likely to keep potential NZD cautious.”
“On the back of the softening in the economic climate in NZ, given concerns that diary prices could drop further and in view of our expectation of further broad based USD gains we expect further downside pressure on NZD/USD during 2015 towards 0.74 on a 6 to 9 mth view, though we expect a moderate outperformance of the NZD vs. the AUD. “