FX CURRENCY WATCH NEW ZEALAND DOLLAR
New Zealand central bank has the New Zealand dollar is brought expected forward to the
expected timing of its first interest rate hike. On a one-year horizon,
strengthen.
Te trend of the New Zealand dollar was mixed (against the US dollar) over the course of 2017. Aſter opening the year on the recovery, almost fully making up the ground lost following the Reserve Bank of New Zealand’s rate cut in November, and in the wake of Trump’s victory in the US, between February and May it dipped back down, fully shedding its previous gains. Te correction was triggered by the indications provided by the RBNZ, which thanks to the improvement in the growth picture abandoned its easing bias in favour of a neutral bias, but – due to the uncertain trend of inflation, which
stayed below the 26 FX TRADER MAGAZINE January - March 2018
lower limit of the target range for two years – warned that rates would have had to stay low for an extended period, adding that the exchange rate was too strong, at unsustainable levels, and pointing to the need of a depreciation of the currency. Between May and July, however, the New Zealand currency rose again, from NZD/USD 0.68 to 0.75 (a high for the year), on the widespread weakening of the US dollar in that phase.
From there, it then resumed dropping, setting a new low for the year at NZD/ USD 0.67 in November. Te new downswing was triggered by
factors: (1) confirmation, on the RBNZ’s part, of both the need to keep rates stable for an extended period of time, due to the inflation trend, and of its view on the exchange rate (need for a weakening of the New Zealand dollar); (2) the widespread recovery of the US dollar, aſter the assurance that it would have raised rates again in 2017; (3) uncertainty at the domestic political level following the elections on 23 September, which upturned the previous balance of power.
three
Te centre-right National Party, which led the country for almost 10 years, has been replaced by a coalition led by
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