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Forex Flash: NZD/USD buy on dips – Rabobank

The kiwi dollar is bouncing off session lows in the vicinity of 0.8230, gathering traction to the boundaries of 0.8260, ahead of the RBNZ meeting due tomorrow.

According to Jane Foley, Currency Strategist at Rabobank, the NZD is facing opposing forces coming from the current drought hitting the North Island, the fiscal austerity and the strong kiwi weighting on the exports sector on one side, and positive momentum in the construction sector from the Christchurch rebuild, on the other.

Although consensus remains for the central bank to leave the refi rate unchanged, market participants expect the RBNZ to hike rates at some point during this year. “Despite the relatively high value of the NZD, in view of investors’ continued demand for yield we expect the NZD to hold its ground vs. the USD this year. We would look to buy NZD/USD on dips and expect a re-test of the year’s high in the USD/NZD0.8535 on a 3 to 6 mth region”, concluded Foley.

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