On Wednesday on BestExchangeRates, we highlighted the troubles of the New Zealand dollar and described how the Treasury’s downgrade of economic growth forecasts sent the currency to multi-month lows against several major currencies. We also added this short summary of the kiwi’s outlook and year so far:
“The New Zealand dollar has come unstuck in August, following a stellar period between May and July, in which the currency gained nearly 10% against the US dollar and 8.5% against the yen. With the RBNZ insisting via its official projections that New Zealand’s cash rate – currently at a record low – isn’t going anywhere until late 2019, and with dairy prices falling in four of the past five auctions, there seems little reason for short-term NZD optimism.”
Now, early on Friday, one of Singapore’s largest banks have done their best to add to the pessimism surrounding the New Zealand dollar by offering their technical perspective on NZD/USD. The bank has suggested a fall to 0.69 is possible in the short-term – an exchange rate not seen since May. NZD/USD rates at 3am GMT on Friday were close to 0.722.
“As highlighted, 0.7235/40 looks like the neck-line of a ‘head & shoulders’ formation and this pattern suggests that the current weakness could potentially move to 0.6900 in the coming weeks,” said a UOB analyst.
A fall to 0.69 would mark a further 4.4% decline in the value of New Zealand’s currency, adding to its 4.7% decline since a high on July 27th, less than one month ago. A move to 0.69 would also eradicate nearly all of the positive work done in NZD/USD between May and July – a period in which the pair rallied from levels around 0.685 to 0.775.
In their message to clients, UOB did, however, note that “we prefer not to get carried away” and the bank expressed a greater degree of confidence in their other prediction for NZD/USD to be in the mid-0.71s in the next one to three weeks.
How will the bank know when they are wrong?
“Only a move above 0.7295 would indicate that our bearish expectation is wrong,” their analysts said.
Forecasts of a longer-term nature include that from July’s survey of business managers by the Reserve Bank of New Zealand. With a median year-end estimate of 0.71 for NZD/USD, the survey was also suggestive of New Zealand dollar weakness ahead.
To make our rather pessimistic consensus whole, we’ll add to the above forecasts the one made by the team at TradingEconomics.com, who see NZD/USD at 0.70 in twelve months’ time.
With these predictions in mind, readers in New Zealand with plans for obtaining foreign currency this year, perhaps for overseas trips or in the form of international payments or remits, should consider bringing forward these plans in order to avoid any imminent loss in their currency’s buying power. By locking in today’s exchange rates, readers can position themselves ahead of further weakness in NZD.
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Consider, for example, that a New Zealander buying GBP 20,000 with today’s best value FX provider will pay only NZD 35,836. Given today’s Bureau de Change average of NZD 37,440, our provider is offering a saving of more than NZD 1,600!