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11 Sep 2014
NZD/USD: Downside risk to 0.80 year-end call - BNZ
FXStreet (Bali) - According to BNZ FX Strategists, there looks to be downside risk to their NZD/USD 0.80 year-end call given the sharp falls in the pair since July.
Key Quotes
"We continue to make good headway south in NZD/USD, to the point that we reached our end-September target (prev. 0.84) faster than anticipated. We revised that near-term target to 0.82. At this stage, with momentum on its side, there looks to be downside risk to our year-end 0.80 call, but we remain there for now. Overall, our track remains more bearish on NZD than the market as a whole."
"In contrast to last month’s update, factors abroad have been the larger influence in the downward progress in NZD/USD. The USD has rallied broadly, as more market participants buy into the view that the US Federal Reserve will formally incorporate the risk of earlier rate hikes in its upcoming policy meeting next week. This view received a boost from Fed Chair Yellen, when she failed to sound stridently dovish in her keynote Jackson Hole address. The market took this as a bit of a green light to enter USD longs."
"Locally, the continued softening of domestic data built the case for the RBNZ to temper its aggressive track of projected rate hikes. And that’s exactly what the Bank delivered at its September policy meeting, lopping 50bps off its rate track by December 2016. Furthermore, the overall tone of RBNZ commentary was one that warned of downside risks to these updated projections, which helps to limit NZD upside. On the currency, Governor Wheeler was no less vitriolic than he was in June, calling the NZD’s strength “unjustified and unsustainable”."
Key Quotes
"We continue to make good headway south in NZD/USD, to the point that we reached our end-September target (prev. 0.84) faster than anticipated. We revised that near-term target to 0.82. At this stage, with momentum on its side, there looks to be downside risk to our year-end 0.80 call, but we remain there for now. Overall, our track remains more bearish on NZD than the market as a whole."
"In contrast to last month’s update, factors abroad have been the larger influence in the downward progress in NZD/USD. The USD has rallied broadly, as more market participants buy into the view that the US Federal Reserve will formally incorporate the risk of earlier rate hikes in its upcoming policy meeting next week. This view received a boost from Fed Chair Yellen, when she failed to sound stridently dovish in her keynote Jackson Hole address. The market took this as a bit of a green light to enter USD longs."
"Locally, the continued softening of domestic data built the case for the RBNZ to temper its aggressive track of projected rate hikes. And that’s exactly what the Bank delivered at its September policy meeting, lopping 50bps off its rate track by December 2016. Furthermore, the overall tone of RBNZ commentary was one that warned of downside risks to these updated projections, which helps to limit NZD upside. On the currency, Governor Wheeler was no less vitriolic than he was in June, calling the NZD’s strength “unjustified and unsustainable”."