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Jul 08 - 01:24 PM
NZD/USD: About 5% Undervalued - MUFG
First appeared on eFXplus on Jul 08 - 11:30 AM

MUFG Research discusses NZD/USD valuation and notes that the US and New Zealand government bond spreads, and expected volatility suggest NZD is currently about 5%undervalued against USD.


"In the top chart is a model-based estimate of the NZD/USD exchange rate over the past 3.5 years. The model uses data from 2016 to 2019 and the model inputs are spreads between US and New Zealand government bonds of various tenors," MUFG notes. 

"What this forecast appears useful for, both over this presented horizon and a longer historical horizon, is providing an indication of whether the relevant currency spot rate is overvalued or undervalued, as the spot price tends to converge to the valuation over time," MUFG adds. 

BTMU Research/Market Commentary


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