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NZD to keep struggling against the US dollar in 2016 - BNZ

FXStreet (Delhi) – Raiko Shareef, Currency Strategist at BNZ, suggests that the bearishness remains intact, and we remain short NZD/USD from 0.6610 heading into December’s Fed events.

Key Quotes

“We’ve tweaked the timing with regard to the bottom for NZD/USD, which we still mark at 0.60, to late-2016. That brings that profile in line with our broader USD story. We see the USD rally extending modestly through 2016, curtailed by near-record market positioning.”

“In truth, we are not sure what level will mark the bottom for NZD, but at present, we’re loathe to formally forecast a fall into the 0.50’s. NZD is relatively well-braced for a final 25bp easing from the RBNZ, and a softly-softly Fed lift-off, both of which we expect in December. The major piece of the puzzle yet to fall into place is higher volatility.”

“A sustainable push below 0.60 would likely need to see some further deterioration in the NZ economic outlook, to the point of inviting the OCR to move to 2.00%. That might come in the form of: further falls in dairy prices, a (greater) El Nino hit to agricultural production, or a crash in Auckland’s housing market. None of these are part of our central forecasts.”

“We see NZD underperforming AUD over the coming 18 months, with the initial quick push below 0.89 driven by the RBNZ’s delivery of the last 25bp easing, and the odds of RBA easing continuing to lengthen. Our NZD/AUD profile sinks into 2017, on the expectation (at this point) that the RBA will edge out the RBNZ to the first rate hike.”

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