NZDUSD: Kiwi’s turn coming soon – ANZ

2022 has been a frustrating year for FX forecasters, and the New Zealand Dollar in general. USD strength continues to dominate, but economists at ANZ do think the NZD will do better in 2023.

USD domination will slowly subside

“Looking ahead, while it is impossible to forecast when we might see geopolitical risks lessen, we do expect USD domination will slowly subside as the US economic cycle itself matures.”

“With the RBNZ expected to hike by 75 bps at the next two meetings, and the Fed expected to slow the pace of hikes, the NZD has scope to regain some lost ground.”

“New Zealand’s external imbalances are large. This is generally viewed by markets as more of a risk factor rather than as a reason to aggressively sell the NZD, but the fact that the deficit is set to narrow over 2023 as international tourism recovers (off a near-zero base) does reduce a negative in the equation for the NZD.”

“One other string in the NZD’s bow is the gap between its current level and fair value, which we see at around 0.65. Our forecasts have this gap slowly closing over coming quarters, taking the NZD to fair value by the end of 2024.”