FX CURRENCY WATCH NZD New Zealand Dollar
The Reserve Bank of New Zealand welcomed the recent depreciation of the exchange rate as an “encouraging move”, while stressing that “further depreciation is needed to achieve more balanced growth”.
Aſter having opened the year with a sharp rise in January, from 0.68 a 0.73 NZD/USD, the New Zealand dollar retraced, returning to the levels it started from between February and March. Te first retreat took place in correspondence with the meeting of the Reserve Bank of New Zealand on 8 February. On that occasion, the central bank abandoned its easing bias, while stressing that “monetary policy will remain accommodative for a considerable period”, given both the numerous sources of uncertainty at the global level, and a stubbornly high exchange rate at unsustainable levels. Te second downswing took place in
48 FX TRADER MAGAZINE April - June 2017
correspondence with the rise in USA yields in the first week of March, ahead of the mid-month Fed meeting.
At its meeting on 22 March, the RBNZ acknowledged the depreciation of the exchange rate, defining it as “encouraging”, while reasserting that “further depreciation is needed to achieve more balanced growth”. Tis time around, the central bank removed the sentence with which it had previously remarked that the currency was too strong, indicating as more adequate an exchange rate roughly just below the NZD/USD 0.70 mark.
Te assessment of the macro scenario, on the other hand, remained the same as in February. Specifically, for what concerns the global picture, the improvement recorded at the beginning of the year was confirmed, although uncertainties persist at the geopolitical level, as also widespread excess production capacity, which is helping keep core inflation low, making it necessary to maintain accommodative monetary policy conditions. As regards the New Zealand economy, growth disappointed in 4Q, slowing from 0.8% to 0.4% q/q, although the RBNZ
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