MUFG Research discusses NZD positioning and outlook.
"The weekly IMM positioning data is a data series tracked by many without necessarily throwing out a strong message but the positioning for the New Zealand dollar is definitely worth highlighting. The latest data, to the week ending 11th August, revealed Leveraged Funds’ total short position had hit a record in the series of the data going back to 2006," MUFG notes.
"The positioning could also reflect scepticism over the ability of the RBNZ to deliver 100bps of tightening over the next year...While 100bps of tightening may prove excessive, the scale of short NZD positioning looks more extreme and we would argue at this level, the bar is relatively high for a notable leg lower for NZD. We should also be mindful of a potential flip in the terms of trade bias. The El Nino risks point to clear upside potential for food inflation over the coming 6mths and that could provide NZD with a positive terms of trade lift," MUFG adds.
