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The kiwi is the best performing G10 currency over the past six months and this reflects speculation that the Reserve Bank of New Zealand (RBNZ) may be among the first central banks to start rolling back its extraordinary policy measures. Jane Foley, Senior FX Strategist at Rabobank, expects NZD to lurch higher in the coming months.

Key quotes

“Given the improved economic backdrop, risk of extended border closures may not be sufficient to prevent the market speculating about the potential for a tapering of the Bank’s QE programme.”

“At its meeting last week, the RBA balanced an improved economic outlook with an extension of its QE programme. This, however, was done against a backdrop of very weak wage inflation. The firmer inflation backdrop in New Zealand suggests that the RBNZ has less scope to maintain extraordinary policy in place than its Australian counterpart.”

“With one eye on the currency, Governor Orr is likely to do his best to sound dovish at the February 24 policy meeting.”

“We have edged our NZD/USD forecasts a little higher and see scope for AUD/NZD to move lower towards 1.04 on a three-month view.”