NZD/USD seen back towards its recent lows in the 0.61 area on a 1 to 3 month view – Rabobank

The US Dollar is likely to remain well bid on the back of safe haven demand despite speculation that the market may have over-estimated the extent of Federal Reserve policy tightening in the coming months, warn analysts at Rabobank. They see the NZD/USD pair moving back to the 0.61 area in the short-term and then moving toward 0.64. 

Key Quotes: 

“The outlook for the NZD in the coming months is likely to influenced by what the RBNZ may have got right.  Since the RBNZ was quick to tighten policy relative to its peers, it may reach peak interest rates ahead of other central banks.  This could have negative implications for the NZD vs some of its peers.”

“In addition to higher interest rates, stuttering Chinese growth and New Zealand’s energy import needs are likely to be headwinds to growth.  Imports of crude oil have stopped since refining was stopped in the Marsden refinery, and this has shifted demand to more expensive downstream products.  In June petroleum and products imports reached a new high.”

“FX volatility has been heightened in recent months and we expect this to continue.  We expect the USD to remain well bid on the back of safe haven demand despite speculation that the market may have over-estimated the extent of Fed policy tightening in the coming months. In our view, USD strength is likely to push NZD/USD back towards its recent lows in the 0,61 area on a 1 to 3 month view.  We expect USD strength to turn around on a 6 month view allowing NZD/USD to recover to the 0.64 region.  We see scope for AUD/NZD to trend higher to 1.12 in the coming months.”