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New Zealand Dollar Outlook: "Up this week" say the forecasters at Westpac (But mind the Tuesday afternoon tumble)

The New Zealand dollar (Currency:NZD) is under significant pressure on Tuesday afternoon:

  • The British Pound to New Zealand dollar exchange rate is 0.76 pct higher than seen at Monday night's closing level at 1.9460.
  • The Euro to New Zealand dollar exchange rate is 0.4 pct higher at 1.6675.
  • The New Zealand dollar to US dollar exchange rate is 0.88 pct lower at 0.7945.

The NZ Dollar is suffering amidst broad-based US dollar strength emanating from some positive US data (more below).

Please be aware that these are wholesale spot market quotes and your bank will subtract their own discretionary spread when passing on their retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, therefore delivering you more currency. Please learn more here.

British Pound remains in a consolidation zone against the NZ dollar

NZD/GBP is currently 0.76 pct lower at 0.5138 - still well within the consolidation zone witnessed at Westpac:

"The one-month long consolidation continues, 0.50-0.53 the range for now, the UK calendar this week is busy with CPI, unemployment and retails sales, as well as the BOE minutes for policy guidance. All of these could significantly impact the GBP."
GBP NZD outlook

Outlook for the New Zealand dollar highly dependent on Fed tapering

A weekly forecast note from Wespac had called the New Zealand dollar to advance against the US dollar this week.

However, this call was made prior to today's US dollar rally. The USD has rallied on good retail data which has currency traders bringing forward their forecasted announcement for the tapering of quantitative easing in the US.

Imre Speizer at Westpac explains:

"NZD/USD remains in consolidation mode, the most likely catalyst for a break outside the 0.7685-0.8135 range being the Fed’s decision on tapering.

best new zealand dollar rate
"Our multi-month forecast is dependent on Fed tapering to start in 2013. Such action could be announced at any of the FOMC meetings in September, October or December. If tapering is announced in September, NZD/USD will probably fall and test 0.7685. Alternatively, if the Fed removes tapering expectations in September and October, then the NZD/USD will rise to the 0.8400-0.8500 area.

"This is not the time for large directional bets, since so much depends on Fed behaviour during the next few months.

"It is however a good time to explore the use of options, not least because they are cheap. First, option implied volatility (the main factor in determining option premium) is significantly lower than actual volatility. Second, the past decade range for 3mth option volatility, for example, has been 7.5%-31.5%, with an average of 13.5%. At 11.0% currently, it is historically cheap."

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