Market Analysis

NZD: Flightless Kiwi May Remain Grounded

Charts don’t lie, and the NZDUSD chart for 2018 reveals a New Zealand dollar that has had a pretty rough ride versus the greenback. But while the rebound from the low 0.6700s last week might suggest the possibility that the kiwi is finding a base, there’s also a narrative that suggests the NZD’s problems might not be over. On the USD side of the NZDUSD equation, last week’s US jobs data might not have provided an immediate fillip for the greenback but such was the strength of that jobs data, the likelihood of a further two Fed hikes in 2018 remains a very real prospect. In contrast the likelihood of the Reserve Bank of New Zealand (RBNZ) raising rates from the current 1.5 per cent seems minimal. Indeed with last week’s Quarterly Survey of Business Opinion showing a fall in general business confidence in New Zealand to levels not seen since 2011 (which helped fuel last week’s fall in the NZDUSD to the low 0.67s) some analysts have even wondered if the RBNZ could even cut rates. Traders might conclude that the NZD’s struggles may continue.

Written by Neal Kimberley, External Currency Analyst.