- NZD / USD supported by a weaker outlook for the US dollar.
- RBNZ may struggle to meet its weaker NZD target.
The NZD / USD is currently trading at 0.6636 between a range of 0.6600 and 0.6675 as the bird heads towards the end of the month on a flight path that surprised the markets.
The Reserve Bank of New Zealand has been the most accommodating of the dollar block, but the currency, despite its wired preference for a lower currency, has practically lost value.
Positioning data from last week showed long positions spiking and the spot market responded in kind, going from a low of 0.6488 to about 3% above the greenback.
At its last meeting, the RBNZ raised the prospect of switching to negative rates.
Fed actions neutralize RBNZ actions
However, for now, there has been a significant shift in focus on the US dollar leading in this week’s keynote address by Federal Reserve Jerome Powell at the Jackson Hole.
Considering that the RBNZ is unlikely to undertake a rate cut until a certain period of next year (ANZ Bank analysts only forecast by April 2021), with the Fed telegraphing a “ lower for longer ” and the greenback in the offer, the bird has found its wings on it.
However, local factors still matter for the NZD and a continued supply of the currency will be frustrating for the RBNZ.
If it is clear that the RBNZ wants the NZD to fall, it will develop a policy to try to achieve that goal, but the actions of the Fed neutralize the actions of the RBNZ somewhat, and this will support risk appetite. ,
ANZ Bank analysts explain.