Morgan Stanley analysts have noted that the Kiwi is still bearish, and gives some underlying reasons why the decline in the NZD could continue into the near future, explaining why they expect the NZD/USD to hit 0.66 within the next 12 months.
Key quotes
“There’s a broad basket of highly levered household sectors, which include Australia, New Zealand, Canada and Sweden, which will all be negatively impacted by Fed tightening.
Economies such as New Zealand “have been most willing to take on cheap financing to boost domestic demand … As these trends unwind, we see these highly levered household currencies underperforming.”
Rate differentials also weighing (RBNZ cash rate at 1.75% matches upper bound of the Fed’s target range, but US rates to be higher in the next 12 months)”
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