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NZD/USD is trading with a heavy tone as the Reserve Bank of New Zealand (RBNZ) officials underscore their strong dovish credentials, though longer-term the kiwi’s outlook is still constructive based on a weakening USD trend and global recovery, as per Westpac.

Key quotes

“NZD/USD is trading heavily, cementing its position as the weakest G10 currency over the past week. This leg down might extend to the 0.6500 region where more meaningful support resides.” 

“RBNZ’s aggressive dovish credentials on full display again this week, Assistant Governor Ha reiterating the Bank’s preference for erring on the side of too much accommodation and that preparation for negative interest rates (and funding for lending program) continues apace. We continue to expect a -0.5% OCR in April 2021 will be required to help inflation recover.” 

“The RBNZ’s dovish tilt likely leaves NZD soft on crosses but we are happy to stick with a more upbeat outlook for NZD/USD beyond the current bout of weakness, targeting 0.6700+ by year-end. Ongoing dovish global central banks, positive vaccine/therapeutic trends and firming global growth are likely to keep risk appetite solid.”