Forecasting a Weaker NZD: Credit Agricole
- Written by: Gary Howes
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Content provided by eFXnews
Credit Agricole update on their latest New Zealand dollar forecasts confirming they believe the currency is overvalued. In a note to clients Credit Agricole write:
Much to the chagrin of the RBNZ, the Kiwi Dollar would be one of the largest beneficiaries of a Summer-time pursuit of carry trades.
We think that the NZD is already overvalued and generating monetary conditions that are too tight for the NZ economy, which is struggling to transition away from a dairy-led investment boom.
Many NZ farmers face a second consecutive season of operating at loss, with downward pressure on dairy prices continuing from supply growth from the EU.
We note that low interest rates and interest-free loans to farmers from Fonterra are preventing a significant rise in NPLs in the dairy sector at this stage.
We are currently long AUD/NZD via a three month call spread expiring in September. Our models suggest that AUD/NZD is significantly undervalued vs relative Australian-NZ interest rates and commodity export prices. This trade also has low sensitivity to risk sentiment.
Credit Agricole CIB are forecasting the NZD/USD at 0.69 in September, 0.67 in December, 0.66 in March 2017, 0.64 in September 2017 and 0.64 in December 2017.