NZD/USD could bounce to 0.6700 during the days ahead – Westpac

Near-term boost from a tiring USD should not last long but could take the kiwi to 0.6700. The 23 February Reserve Bank of New Zealand (RBNZ) is fully priced for a 25bp hike, so yield spreads probably will not help, economists at Westpac report.

There is potential for one last dip below 0.65

“NZD/USD found a recent low at 0.6530 and could potentially bounce to 0.6700 during the days ahead. That’s a reflection of the USD’s pullback, rather than any upbeat local news.”

“Weighing on the NZ has been its fully priced (some would argue slightly overpriced) RBNZ tightening cycle. The RBNZ will need to continue raising interest rates, but it can continue to do so at a measured pace.”

“Yield spreads are unlikely to be helpful during the months ahead, suggesting there’s potential for one last dip in NZD/USD below 0.65.”