NZD/JPY Outlook: Likely to increase, as the rate is significantly above its recent average and near recent highs with positive external conditions supporting the New Zealand dollar.
Key drivers:
• The Reserve Bank of New Zealand's recent interest rate cuts contrast sharply with the Bank of Japan's tightening, creating a favorable outlook for the NZD against the JPY.
• Oil prices are at recent highs, contributing to a positive risk environment that supports commodity-linked currencies like the NZD.
• Japan's easing inflation trends could affect the yen's strength, especially as the Bank of Japan resumes its tightening focus.
Range: The NZD/JPY is likely to drift higher within its recent range, as external factors provide support for the New Zealand dollar.
What could change it:
• An unexpected decision by the BoJ to accelerate rate hikes could strengthen the yen.
• A further deterioration in New Zealand's economic data or a worsening trade outlook may weaken the NZD.