ANZ Research maintains a structural bearish bias on NZD through year-end.
"By virtue of its economy, New Zealand was highly exposed to the pandemic’s fallout. It experienced a total drop in tourism, which will weigh on domestic incomes, spending and house prices. Even as regional tourism resumes, and with government support, a weak global demand backdrop is likely to slow the domestic recovery. The RBNZ’s dovish guidance – a willingness to consider negative rates and a preference for quantitative easing across the curve – has created a setting for domestic rates outperformance. This policy divergence is likely to dampen the NZD’s performance, particularly against more cyclical currencies that are policy constrained either by choice or by proximity to an effective lower bound," ANZ notes.
"Our AUD/NZD forecast reflects this. We have lifted it to reflect the sustained weakness in the NZD leg, stemming from a relatively lower rate structure. Against the USD and JPY, however, we think the risk environment is the predominant driver. We are cautious on the global recovery and see rising risks from geopolitical tension as a potential downside catalyst to the market view. This is reflected in our NZD/USD forecast path to 0.55 by year-end," ANZ adds.