NZD Corporate FX Update
Despite the strong recovery in the NZD it remains “cheap” and we maintain a positive outlook
After falling through the first four months of the year, the NZD staged a strong 4½% recovery in May and has extended gains into early June, to reach a three-month high just over 0.62. There have been multiple driving forces and, despite the strong recovery, the NZD remains fundamentally cheap against our short-term fair value model estimate, which has been hovering around 0.67 through most of 2024.
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NZD Corporate FX Update
The NZD continues to languish near 0.60. Our April forecast revision with a target of 0.60 by end-June allowed for the trading range to extend down to as low as 0.58 but, so far, the intraday low has been 0.5852.
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Delayed Fed easing = delayed NZD/USD recovery
For some time, the underlying assumption driving our FX forecasts has been the beginning of a US Fed easing cycle would drive broad-based USD weakness, allowing a sustained recovery for the key majors. The Fed kick starting a tightening cycle from March 2022 and expectations of tighter policy in the months leading up to that period, drove a significant upturn in the USD and a policy reversal was seen to be critical for any sustained USD downturn to prevail.
Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.