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The NZD/USD pair is likely to trade around 0.65 in a 1-3 month view amid the Reserve Bank of New Zealand’s (RBNZ) dovish rhetoric, Rabobank Senior FX Strategist Jane Foley argues. 

Key quotes

“In Q2, New Zealand GDP shrank by a record 12.2% q/q. This contraction was around half of the 23.5% q/q fall that the Treasury had predicted back in May. The better than expected outcome was a consequence of the country’s domestic COVID related restrictions being relatively shortlived.”

“All measures were lifted in New Zealand in June, although Auckland temporarily reimposed a lockdown in August. Despite the country’s relative successes in stamping out COVID-19, many border restrictions remain, meaning that its tourism and education sectors in particular remain under pressure.”

“Last month the RBNZ remarked that “the pandemic and associated travel restrictions could have a significant long-term negative impact on the economy”. Given the second wave of covid-19 underway in Europe and parts of the US, it is likely that border restriction will remain in place for some time yet.”