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– The NZD's forecasts are revised downward at the Bank of New Zealand but the worst is over.
-NZD faces almost unprecedented challenges but losses for the most part already.
-NZD / USD Rises Modestly in 2018/19 Kiwi Pound Sterling
© Rafael Ben-Ari, Adobe Stock
The New Zealand dollar is appreciated against the US dollar and the US dollar. Thursday and, according to the latest Bank of New Zealand forecasts, the worst could New Zealand's Bank strategies lowered their NZD / USD rate this week, but they have revised their forecasts upwards for the New Zealand pound-dollar rate. , with the New Zealand dollar expected to climb gradually to the US dollar and the British pound over the next few months. If they are right, it seems that the recent sale of Kiwi exchange rates is now over.
The forecast update follows a tumultuous first half that left the kiwi currency trading on a 4% loss against the dollar and down 2% against the pound sterling. Even these losses dramatically underestimate the ferocity of liquidation in the second quarter because kiwi currency had risen 6% against the dollar and 2.5% by the pound sterling in the first three months of the year. # 39; year.
We started the year with a negative outlook for the NZD weighted index and we maintain that view in the medium term, "says Jason Wong, FX strategist at Bank of New Zealand, a division of National Australia Bank. "Our forecasts show some stabilization of the TWI in the second half before falling back again until 2019 and 2020. However, our current forecasts do not incorporate some of the downside risks that have emerged for the NZD over the past year. last weeks. "
An continued slowdown in Kiwi growth is seen as cementing the Reserve Bank of New Zealand into its "pending" interest rate position until 2019, with prices in the markets of indexed overnight swaps March 21, 2019% Since the end of 2016, the Kiwi rate is at its all-time low of 1.75%.
This suggests a 20% probability that the RBNZ has increased its interest rates by then, which poses a problem for the kiwi currency the US economy is growing strongly and the Other central banks are also increasing their interest rates.
The Kiwi has long enjoyed interest rates generally higher than those of other developed countries, but the rate of US federal funds has exceeded the counterpodean counterpart, while the gap between the costs of 39, borrowing from Kiwi and those elsewhere in the world is also expected to shrink in the coming quarters.
This means that investors are encouraged to sell Kiwi dollars and buy the greenback. rather than vice versa, which is the opposite of how the so-called carry trade worked. "This cycle for the NZD is very similar to the cycles of the mid-1990s and the late 1990s, when a more restrictive global monetary policy led to a weakening of the TWI NZD.The theory is that tighter global monetary policy is leading finally to the weaker global growth to which the NZD is sensitive, "Wong said.
In the late 1990s, extending over the years 1999 and 2000, the New Zealand dollar This fall in prices not only coincided with a sharp rise in US, UK and US interest rates. but was also the last time that interest rate or yield differentials favored the United States. The one-year swap spread between New Zealand and the United States has fallen and recently dropped to zero, reflecting the continued monetary policy by the RBNZ while the Fed maintains a gradual tightening pace, "Wong writes. in a breifing on Thursday. "In a more uncertain global outlook with increasingly intense trade wars, the appetite for risk probably deserves to decline."
While Wong and the BNZ team have lowered their forecasts for the Kiwi, and upward for the currency is not only limited, but also tentative, the worst seems to be over for the Kiwi now compared to the US Dollar.
They predict that the NZD / USD rate will gradually increase to 0.69 at the end of September and 0.70 before the end of the year.On the other hand, the New Zealand pound – dollar rate should steadily increase to 1.92 at the end of the year. end of September and 1.96 before the end of the year
The NZD / USD rate was 0.41% higher at 0.6787 On Thursday, the Pound Sterling to Kiwi dollar was 0.45% to 1.9478.
"While much of this note expresses challenges for the NZD, there are good reasons not to become too bearish," concludes Wong. "The overall theme of the last month of strong downward pressure on commodity prices, including agricultural commodities, has not really applied to New Zealand commodities, but the NZD has been sold despite everything 19659006]
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