NZD: China Risks – BNZ

NZD: China Risks – BNZ

24 May 2016, 13:53
Roberto Jacobs

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.”


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