Halister News

(Bloomberg) -- NZD is strong and a little overbought in short-term but is not particularly overvalued in a longer term context, Jason K Wong, currency strategist at BNZ Wellington writes in note today.

• Economic fundamentals remain supportive for NZD and there is a lot to like about the currency, says Wong
• To meet NZD/USD year-end target at 0.7000, it will need more intent from Fed on rate hikes and further falls in risk appetite
• Disagrees with RBNZ’s constant refrain that the NZD is high, a significant headwind for the economy and needs to depreciate
  • BNZ’s valuation metrics show New Zealand’s better than average external accounts and robust levels of business confidence would suggest otherwise
• RBNZ language on the TWI has been moderating over recent quarters and is less aggressive
• NZD TWI is only modestly overvalued by around 6-7%; with NZD/AUD at ’only’ 7% above PPP, which equates to 1.2 standard deviations
• RBNZ’s currency projections of a weaker TWI are not internally consistent with the central bank’s own economic projections
• Risk to view would be a dovish Fed next week with a lowering of longer term interest rate projections leading to an immediate halt in declining risk appetite, thus NZD supportive
• NZD/USD up 0.1% to 0.7261