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12 Jun 2014
NZD making sharp advances - BTMU
FXStreet (Guatemala) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ notes the conditions surrounding the NZD of late.
Key Quotes:
"The New Zealand dollar has strengthened sharply in the Asian trading session following the release of the more hawkish than expected RBNZ monetary policy statement. The RBNZ raised their key policy rate by 0.25 point to 3.25% for the third consecutive meeting in 2014."
"The RBNZ also signalled that it still expects to tighten monetary policy aggressively in the coming years with the forecasted profile for the 90-day bank bill rate left almost unchanged compared to in March. The RBNZ forecasts that the 90-day bank bill rate will rise towards 4.0% by year end and continue rising to just above 5.0% in the second half of 2016."
"The market had in recent months moved to discount a less aggressive rate hike cycle which had been weighing modestly on the New Zealand dollar in the near-term. The RBNZ expects inflation pressures to increase as above trend growth, with GDP estimated to have expanded by annual rate of around 4.0% in the year to June, is absorbing spare capacity."
"The recent decline in dairy prices is leading to a deterioration in New Zealand’s terms of trade. The RBNZ noted that they expect the New Zealand dollar to adjust lower over time as current levels are unsustainable. It remains the most overvalued G10 currency according to our updated valuation framework
Key Quotes:
"The New Zealand dollar has strengthened sharply in the Asian trading session following the release of the more hawkish than expected RBNZ monetary policy statement. The RBNZ raised their key policy rate by 0.25 point to 3.25% for the third consecutive meeting in 2014."
"The RBNZ also signalled that it still expects to tighten monetary policy aggressively in the coming years with the forecasted profile for the 90-day bank bill rate left almost unchanged compared to in March. The RBNZ forecasts that the 90-day bank bill rate will rise towards 4.0% by year end and continue rising to just above 5.0% in the second half of 2016."
"The market had in recent months moved to discount a less aggressive rate hike cycle which had been weighing modestly on the New Zealand dollar in the near-term. The RBNZ expects inflation pressures to increase as above trend growth, with GDP estimated to have expanded by annual rate of around 4.0% in the year to June, is absorbing spare capacity."
"The recent decline in dairy prices is leading to a deterioration in New Zealand’s terms of trade. The RBNZ noted that they expect the New Zealand dollar to adjust lower over time as current levels are unsustainable. It remains the most overvalued G10 currency according to our updated valuation framework