For much of this year, banks have been betting on further Australian dollar deprecation, but after last week’s RBNZ shocker, they have also given a thumbs down to the New Zealand dollar.
Analysts at Westpac, which had already forecast an Australian dollar slide to US$0.68 this year, are now betting against the New Zealand dollar, too, as are experts at ANZ and Societe Generale.
Per FXStreet, Westpac’s head of NZ strategy, Imre Speizer, had this to say on Friday:
“The RBNZ’s dovish shift earlier this week was a major surprise for markets and forecasters. Fundamental developments didn’t necessarily warrant such an abrupt shift but concerns NZD could rise further appeared to be a major decision factor. The RBNZ has signaled its aversion to currency strength and we expect that to remain a key element of its dovish stance going forward.”
Speizer says he now prefers selling New Zealand dollars following any corrective bounces, with an expectation that the world’s eleventh-most traded currency will lose value in the near term.
For French bank Societe Generale, the RBNZ’s new interest rate outlook marks the beginning of a “process for returning AUD/NZD towards more neutral [higher] levels.” Ahead of the RBNZ’s statement, the kiwi dollar had gained 9 percent on its Aussie counterpart since last August, forcing the exchange rate to unfamiliar levels below NZ$1.03—a rate previously broken in only 4 of the 230 months since the turn of the millennium.
Both the Aussie and kiwi dollar will lose value against more resilient Asian currencies like the Chinese yuan and Singapore dollar, thinks ANZ’s head of Asia research Khoon Goh.
Economic problems affecting the Antipodean region include a global economic slowdown, the US-China trade spat and, in Australia’s case, a housing market slump, all of which easily offset strength in industrial commodities and dairy markets.
This week the US Dollar was touching three-year highs when valued against a basket of major currencies. The greenback’s traditional role as one of the safe-haven currencies is helped by a domestic economy that is largely immune to the threats of the coronavirus.
Last update: 22 Feb, 2020
The strong start to the year for “risk-on” currencies is already a distant memory.
Posted: 3 Feb, 2020
The threat of a proxy war between the US and Iran in Iraq has pared back some of the recent gains of “risk-on” currencies.
Last update: 8 Jan, 2020