Yesterday, ABN AMRO released their latest FX forecasts for 2017 and 2018. There were few notable revisions, nor was there much in the way of standout predictions, with the exception of one – NZD/USD to rise to 0.80 in 2018.
The ‘kiwi’ hasn’t traded at or above 0.80 against the US dollar since October 2014. A move to that level from its current price of 0.6993 (as of 02:00 GMT, April-21) would mark a 14.4% rise – a large amount if you’re planning on buying property or investing in New Zealand, or planning holidays there.
New Zealand dollar appreciation will likely be driven by expectations for interest rate hikes, especially given yesterday’s inflation data which showed consumer prices in New Zealand rising at their fastest rate since 2011. Central banks raise interest rates in order to keep inflation under control, and higher rates attract deposits and investments from overseas – something which necessitates the conversion of foreign currency into New Zealand dollars (buying of NZD). As the demand for New Zealand currency increases, so will its price.
With this in mind, readers in need of New Zealand dollars this year or next should consider bringing forward purchases of the currency to take advantage of what are, according to ABN AMRO, good value exchange rates.
Aussie Up, Yen Down on Thursday as US Treasury Secretary Puts Reflation Theme Back in Focus
“Major tax reform” is coming “very soon”, said US Treasury Secretary Steven Mnuchin on Thursday.
Mnuchin’s comments – given to an audience at the Institute of International Finance in Washington – have worked to reignite the reflation story that was so prevalent in November and December, but which has fizzled out in 2017.
As a consequence, the carry trade was back on yesterday, with the Australian dollar posting across-the-board gains and the yen weakening.
The Australian dollar-to-Japanese yen exchange rate had fallen in fifteen of the past twenty-two trading days to lows at 81.59 as of Wednesday’s New York close. Those had been new five-month lows in the rate, driven by a steep fall in the price of iron ore, a flight to safety amid heightened geopolitical risk, and a reduction in market expectations for the scale and likelihood of Donald Trump’s reflating policies.
At Thursday’s New York close, AUD/JPY had managed to claw back some of its recent losses, ending the session at 82.27, up 0.8% on the day.
Against the US dollar, the Australian dollar gained 0.4% and the yen weakened by the same amount. Rates for AUD/USD and USD/JPY are now at 0.7526 and 109.31 respectively.
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