NZD: China Risks – BNZ
Jason Wong, Currency Strategist at BNZ, suggests that the outlook for China remains a key source of downside risk for the NZD.
Key Quotes
“Debt levels in China are rising at an unsustainable pace and ultimately
represent a hand-brake on growth. The Yuan is over-valued and would be
significantly weaker if market forces were allowed to operate. The PBoC
is currently engineering a modest depreciation path for the Yuan, but if
large net capital outflows returned, then the ability to achieve such a
gradual path diminishes.
A weaker Yuan ultimately feeds through into weaker Asia-Pacific
currencies like the NZD and these forces will continue over coming
quarters/years. While our central view is consistent with the PBoC
managing to maintain control over its currency, a tail-risk is that a
more forceful depreciation is forced upon and this spills over into a
significant depreciation for the NZD.”
