NZD/USD: The developments should reinforce Kiwi’s recent bearish trend – MUFG

So far this month, Kiwi has been the second worst performing G10 currency as both the Australian and New Zealand Dollars have declined sharply by around -4.1% against the US Dollar. Economists at MUFG Bank analyze NZD outlook.

RBNZ could lower the OCR sooner than signalled

The recent sharp drop in the kiwi has attracted the attention of the RBNZ’s Chief Economist Paul Conway who stated that they will be ‘mindful’ of the depreciation going forward. He says the recent depreciation reflects a reduction in interest rate differentials and risk aversion. 

The New Zealand Dollar has underperformed this month alongside other commodity-related currencies there has been more focus on the loss of growth momentum in China. RBNZ Chief Economist Conway stated that ‘if there was a more significant slowdown in China than the RBNZ expects, hurting exports and growth, we would lower the OCR sooner than we have signalled’. 

Overall, the developments should reinforce the Kiwi’s recent bearish trend.