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New Zealand’s economic recovery has been stronger than expected, NZ commodity prices have beaten expectations and NZ interest rates are rising. With these supportive fundamentals in Q1 2021, economists at Westpac forecast the NZD/USD pair at 0.75 by mid-2021.

Key quotes

“The main drivers of NZD/USD are expected to remain aligned and supportive. We are sticking with our upbeat global sentiment/downbeat US dollar view, which is the main explanation for our 0.7500 forecast by mid-2021. For end-2020, we expect 0.7200.”

“Domestic factors, such as economic performance, commodity prices, and yield spreads, are expected to extend recent trends.”

“For now, we continue to forecast a lower OCR by August 2021, which is why we have NZD/USD tracking sideways from mid-2021 onwards. The main risk to this view is that inflation is higher than we have forecast, and further easing will be unnecessary. In that case. NZD/USD would probably exceed 0.7500 in 2021.”