Analysts at MUFG Bank explain the New Zealand dollar surged in November in response to the positive news on the probable roll-out of vaccines that could now come sooner than originally expected. They see the NZD/USD rising over the next months with a target at 0.72 by the end of the second quarter of next year.
“The election of Joe Biden in the US has further reinforced the positive global growth outlook with the removal of trade tariff risks. Global investors are now positioning for a global growth rebound with Asia in a strong position already to take advantage. That sets the scene for continued NZD appreciation next year.
“The RBNZ did act in November but not through traditional policy steps. The launch of the Funding for Lending Scheme was viewed by the markets as the least aggressive of the options available that included a rate cut and/or further QE.”
“The prospect of negative rates in New Zealand appears very small now. The government also expressed concerns over the impact of loose monetary policy on the housing market and wrote to the RBNZ to ask for house price stability to be included in the RBNZ’s remit. We don’t think a change in remit is coming but this may influence market expectations on RBNZ policy that will support yields and the New Zealand dollar.”