The New Zealand dollar (NZD) has recently shown strength, buoyed by a favorable market sentiment and a risk-on approach among traders. Currently trading at 88.82 JPY, the NZD is 2.2% above its 3-month average of 86.91, reflecting a relatively stable trading range of 5.3% over the past months, between 84.43 and 88.88. The NZD's performance is expected to remain closely tied to global risk appetite, which suggests that a bullish tone could persist if risk sentiment continues to thrive.
In contrast, the Japanese yen (JPY) is traditionally viewed as a safe-haven asset, gaining traction amid global economic uncertainties and geopolitical tensions. With Japan’s ongoing trade challenges, compounded by tariffs imposed by the US, the yen has shown fluctuations as traders seek security in times of instability. The yen’s value is particularly sensitive to shifts in US dollar strength, with current forecasts by MUFG Research suggesting a decline in the USD/JPY exchange rate from a projected 154.00 in Q1 2025 to 148.00 by Q4 2025.
The trade dynamics involving the NZD also suggest potential vulnerabilities. Political developments, particularly changes in US administration leading to stricter tariffs on key commodities, could dampen demand and affect the NZD negatively. Moreover, correlations between the NZD and other commodity currencies, like the Australian dollar (AUD), imply that shifts in global commodity prices will impact the NZD.
Furthermore, fluctuations in oil prices significantly influence the JPY due to Japan’s reliance on imported energy. Currently, oil is trading at 68.44 USD, 1.5% above its 3-month average. The volatility seen, with prices ranging from 60.14 to 78.85, could affect Japan's trade balance and thereby the yen’s strength.
In summary, while the NZD remains supported by an optimistic market outlook, factors including potential tariff risks and commodity price movements present challenges. Concurrently, the yen's safe-haven appeal and responses to global economic shifts will continue to shape the NZD/JPY exchange rate in the coming months.