NZD: Wary of chasing higher at current levels - ANZ

Analysts at ANZ remain wary of chasing the NZD higher at current levels despite New Zealand’s economic credentials, which still deserve respect.

Key Quotes

“The microeconomic agenda is strong, the terms of trade are at a 40+ year high and carry remains attractive. Against a backdrop of increased US political uncertainty and an apparent backpedalling of earlier hawkish rhetoric across the major central banks, it is little wonder the NZD is elevated.”

“However, we believe NZD strength is on borrowed time. NZD positioning remains extremely long. New Zealand’s relative position is slipping, domestic growth is levelling out and the general election is just around the corner. We expect a turn in the global liquidity cycle, which will present challenges for risk assets. NZ-US 90 day, 2 year and 10 year spreads have closed up with z scores (standard deviations from mean) for each well below historical averages, while the NZD is north of average.”