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The global economic recovery will continue to be the driver of movements in the kiwi. Furthermore, RBNZ’s upcoming monetary policy meeting on 12 August is likely to provide a check on the near-term strength in the NZD, according to economists at HSBC. 

Key quotes

“For the NZD specifically, the low virus transmission numbers are a mixed blessing for the economy. While it does allow the domestic economy to get back on track faster, it also means that international borders look set to remain closed for a prolonged period of time, likely longer than those countries hit harder by the virus. Faced with these complex trade offs and significant uncertainty over the future path of the virus, the FX market has chosen to largely ignore local developments and focus on global.”

“Our near-term caution on the NZD also reflects dovish risks around the RBNZ policy going into the 12 August meeting. Unlike the RBA, which appears happy to sit tight, the RBNZ has signalled that NZD strength is unwelcome and that all aspects of its policy are up for review. A wide range of options are kept open including further expansion to QE, a negative official cash rate, and even debt monetization. All of these options would be negative for the NZD.”