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NZD/USD biased towards 0.82 in a 12m view – Rabobank

FXStreet (Edinburgh) - Jane Foley, Senior Currency Strategist at Rabobank, expects the pair to hold a 0.84-0.85 band in a 3-month view.]

Key Quotes

“Even though expectations regarding the prospect of further policy tightening from the RBNZ have been pared back, the market still sees scope for one more 25 bp rate rise from the RBNZ by the end of the year. The timing of any additional move will depend on the evolution of economic conditions”.

“The sharp decline in diary prices since February and the potential impact on incomes is being linked with fears of less optimistic forecasts for growth this year. The RBNZ is currently expecting growth at 0.7% a quarter and 3.5% for the year”.

“The 1% drop in the NZD/USD over the past few weeks is a recognition of the cooling in the pace of economic activity. That said, the New Zealand economy remains relatively well positioned and we expect the USD/NZD to find decent support over the coming 3 months”.

“While political uncertainty poses a threat for the NZD into the September election, the strong showing in the opinion polls for the PM National Party suggests that the currency impact should be modest”.

“We expect USD/NZD to hold a the 0.84 to 0.85 area on a 3 mth view with risk for a moderate decline towards 0.82 on a 12 mth view on the assumption that the USD displays signs of broad based strength medium-term”.

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