The NZD is BNP Paribas' favoured currency in the commodity bloc and represents excellent value versus the low yielders of the FX world. BNPP outlines 5 m,in reasons behind this view;
1- New Zealand offers the highest carry in the G10 at 350bp
2- NZ commodity price performance has been more robust than Canada or Australia. Since the start of 2011, the latter two price indices have fallen by 34%. In contrast, NZD prices are down by a more modest 10% and are actually higher than the trough reached during H2 2012 .
3- Dairy prices – milk products are New Zealand’s key export at about one-third of total – have risen considerably since mid-December.
4- The market is short the NZD. There is considerable potential for the NZD to rebound in this environment.
5- FX carry is likely to stage a rebound... The NZD should perform best against the low yielders, especially the JPY, EUR and CHF.
