NZD/USD: Strong economy and a central bank already hiking can help kiwi recover
05.01.2022, 07:24

NZD/USD: Strong economy and a central bank already hiking can help kiwi recover

The strength of the US dollar has been too much for the New Zealand dollar, and that will likely persist for longer. However, the kiwi has reasons to rise when the dust settles – or at least to outperform its peers, in the opinion of FXStreet’s Analyst Yohay Elam.

New Zealand's dependence on dairy products is a positive for the kiwi

“The Reserve Bank of New Zealand (RBNZ) is not sitting on the sidelines – it raised interest rates both in October and then in November. The RBNZ is backed by a robust economy.” 

“New Zealand has an advantage over other countries in that it relies on the export of agricultural goods, mostly dairy products. That contrasts Australia's metal resources and Canada's oil. If China imposes more lockdowns due to Omicron or extends the crackdown of its property sector, that would have no impact on its demand for food.” 

“Another source of income for New Zealand is its tourism sector. Only recently has the country reopened to some visitors from abroad. If the economy is doing so well without foreign tourists, it could further thrive when they come back.”

“How does the Fed-driven dollar match with New Zealand's upbeat fundamentals? In the short-term, bears will likely remain on top, as King Dollar reigns supreme. They could receive further boosts from Nonfarm Payrolls and later from US inflation data. Later on, the kiwi could claw its way back up. While most economic releases in New Zealand are only quarterly, they tend to have a significant impact.”

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