New Zealand Dollar Weakness Forecast But Losses Shallower than Previously Thought say ASB

Analysts at New Zealand's ASB Bank have adjusted their NZ dollar forecasts to account for a shallower decline.

ASB Bank adjusted their FX forecasts in September to take into account several developments at the time. Since those forecast adjustments were made the NZD rebounded; "we still expect further NZD weakness from here, though the risk is the NZD doesn’t fall quite as far as forecast," say analysts at the bank.

The New Zealand dollar is starting to come off the boil once more having enjoyed a particularly positive period lasting betwen mid-September through to mid-October.

Gains have however now been capped and we are seeing other G10 counterparts claw back some of the losses. We are however some way off the full extent of the NZD's gains being fully retraced.

This week, the currency is likely to be weighed down by New Zealand inflation data to be released on Tuesday and the latest trends in dairy prices which are to be communicated via the Global Dairy Trade event on Wednesday.

• The pound to New Zealand dollar exchange rate (GBPNZD) is seen trading at 2.3481, the latest move lower comes as RBNZ's quarterly poll shows business managers expect inflation will be 1.85 percent in two years time, compared with 1.94 percent in the previous period.
• The New Zealand to US dollar exchange rate (NZD/USD) is trading at around 0.6463. Due to an anticipated strengthening of the USD and a continuation of poor dairy prices, it is expected that the NZD/USD pair will be weighed down this week.
• The New Zealand to Australian dollar exchange rate (NZD/AUD) is trading at around 0.9125. For this pair, the pressure is positioned on the AUD as markets keep a close watch on the upcoming publication of the Reserve Bank of Australia meeting minutes and the release or the Australian wage data – both of which can add to a rate cut expectation.

New Zealand Dollar Forecasts Adjusted, Downside Preferred

ASB Bank have confirmed to clients they have adjusted their medium-term outlook on the NZD saying they expect the headline NZD/USD exchange rate to ease below 0.60, and trade in the high 0.50s over early 2016.

“We adjusted our FX forecasts in September to take into account several developments. Since then the NZD has rebounded; we still expect further NZD weakness from here, though the risk is the NZD doesn’t fall quite as far as forecast,” ASB say in a note to clients.

It is anticipated that the Reserve Bank of New Zealand (RBNZ) will cut the Official Cash Rate to 2.50% in December confirming the trend of widening policy divergence between the RBNZ, US Federal Reserve and Bank of England.

“Given New Zealand’s low wage and CPI outlook, in our view there is a risk of further RBNZ rate cuts in 2016 that will undermine the NZD/USD,” says a note on the matter from ASB.

Latest Pound / New Zealand Dollar Exchange Rates

	Live: 2.3118▼ -0.04% 12 Month Best: 2.3553
*Your Bank's Retail Rate	2.2332 - 2.2424
**Independent Specialist	2.2794 - 2.2887 Find out why this is a better rate

* Bank rates according to latest IMTI data.

** RationalFX dealing desk quotation.

 

Analysts expect the USD to re-strengthen modestly once the Federal Reserve tightens monetary policy, adding further downward pressure to the NZD/USD.

“Our revised growth outlook for China and related outlook for hard commodity prices is particularly important for our AUD outlook. We expect AUD to ease to 0.6500 by Q1 next year, and NZD/AUD to ease modestly lower over the year ahead,” say ASB regarding the Kiwi’s chances against the Aussie in coming weeks.

NZD/EUR forecasts have the cross rate trading in a range centred on 0.55 over the year ahead, while it is expected that against the pound sterling losses will be seen.

NZD/GBP is predicted to ease below 0.40 by early 2016. (This equates to GBP/NZD at 2.50).

Elsewhere, ASB raise their JPY forecasts.

Japan’s current account surplus has rebounded to more than 2% of GDP. A large current account surplus is very supportive for currencies. “We now expect NZD/JPY to ease below 0.70 over the year ahead,” say forecasters.