The New Zealand dollar (NZD) has recently gained traction, buoyed by risk-on sentiment that has driven demand for this high-yield currency. Analysts note that if this positive market sentiment continues, the NZD could sustain its upward trajectory. Currently, the NZD to CAD exchange rate is at 14-day highs near 0.8147, reflecting stability within a 2.8% range over the past months, which indicates a moderate bullish outlook.
Conversely, the Canadian dollar (CAD) faces challenges as it has weakened against the USD, largely due to a slump in oil prices, which have hit a four-month low. Experts point out that the CAD, being commodity-linked, is particularly sensitive to fluctuations in oil prices. With oil currently trading at $64.53 and significantly below its 3-month average, the potential for further depreciation in the CAD could become a reality if the downward trend continues ahead of key OPEC discussions.
Recent monetary policy changes have affected both currencies; the Reserve Bank of New Zealand (RBNZ) has reduced its official cash rate to support a sluggish economy, which generally diminishes the NZD’s attractiveness compared to currencies with higher yields. In contrast, anticipated rate cuts by the U.S. Federal Reserve may weaken the USD and, by extension, offer some room for CAD appreciation in the medium term.
Market analysts highlight the increasing uncertainty surrounding the Canadian economy, influenced by a declining manufacturing sector and the complexities of renegotiating the USMCA, identifying these as contributing factors that could pressure the CAD further. With the upcoming economic data releases and central bank meetings, both the NZD and CAD could experience further volatility.
Investors and businesses engaging in international transactions should remain attentive to these developments, as the interplay of risk sentiment, commodity prices, and monetary policy can significantly impact the NZD/CAD exchange rate going forward.
