The Danske Bank Research Team notes RBNZ expects NZD to undergo significant depreciation, with the currency’s valuation unsustainable in terms of NZ’s economic fundamentals.
Key Quotes
“The NZD dropped more than 1.6% against the USD as the Reserve Bank of New Zealand (RBNZ) unexpectedly left out its hawkish bias in its statement following yesterday’s monetary policy meeting. RBNZ maintained the cash rate at 3.5%as expected but stated that it expects to keep the OCR on hold for some time’ and that future rate decisions-no matter the direction-will depend on economic data.”
“With respect to the NZD, RBNZ stated that the bank expects ‘a further significant depreciation’ as the NZD remains ‘unjustified in terms of current economic conditions, particularly export prices, and unsustainable in terms of New Zealand’s long-term economic fundamentals’.”
“FX intervention figures released post the RBNZ meeting showed that RBNZ net sold NZD in December worth NZD16M.”
“While our targets for NZD/USD have been reached, we expect more downside to play out in the coming months as commodity prices continue to weigh on the NZD and as a Fed re-pricing will drag the cross lower.”
Key Quotes
“The NZD dropped more than 1.6% against the USD as the Reserve Bank of New Zealand (RBNZ) unexpectedly left out its hawkish bias in its statement following yesterday’s monetary policy meeting. RBNZ maintained the cash rate at 3.5%as expected but stated that it expects to keep the OCR on hold for some time’ and that future rate decisions-no matter the direction-will depend on economic data.”
“With respect to the NZD, RBNZ stated that the bank expects ‘a further significant depreciation’ as the NZD remains ‘unjustified in terms of current economic conditions, particularly export prices, and unsustainable in terms of New Zealand’s long-term economic fundamentals’.”
“FX intervention figures released post the RBNZ meeting showed that RBNZ net sold NZD in December worth NZD16M.”
“While our targets for NZD/USD have been reached, we expect more downside to play out in the coming months as commodity prices continue to weigh on the NZD and as a Fed re-pricing will drag the cross lower.”
