NZD/USD still projected at 0.70 by year-end - BNZ

The NZD/USD remains stuck in a 0.6650-0.6950 trading range, which is expected to continue over coming months, according to analysts at BNZ. As the year progresses, they expect a more positive tone to the global economic backdrop to prevail – a factor which the NZD is sensitive to – supporting a move to 0.70 by year-end.

Key Quotes: 

“Currency volatility is remarkably low and we haven’t had to change our NZD projections for the best past of five months now, seeing a 0.67-0.70 prevailing through the year.”

“Conflicting forces have kept the NZD range-bound. On the positive side, higher risk appetite and commodity prices are tailwinds and have driven our short-term fair value model estimate higher all year to about 0.69. But uncertainty about the global economic outlook remains a headwind. The RBNZ’s recent dovish pivot added some downside risk, but moderately to the extent that it followed a similar theme seen by other G10 central banks.”

“Our projections still have the NZD ending the year around 0.70, a little higher than the top of its trading range this year, as these more positive global forces predominate. By contrast, the case for a lower NZD would be if global economic momentum lurched downwards and/or the RBNZ cut rates by more than 50bps over coming quarters, against a backdrop of unchanged policy expectations for other central banks.”

“Exporters should consider continuing to look to increase cover near the bottom of the recent trading range around 0.67, while importers should take advantage of moves above 0.69. The 0.6950 mark remains a key level of resistance.”