NZD/USD seen at 0.70 in 6-month – Danske Bank

Analyst at Danske Bank Minna Kuusisto, expects the Kiwi dollar to slip towards the 0.70 area in the medium term.

Key Quotes

“The September sell-off and NZD weakness has bought RBNZ some time to see how economy responds to its latest easing measure. However, as inflation is expected to stay low, we expect RBNZ to cut rates again by Q1 17 at the latest. Despite of our positive view on EM in general, we expect only a gradual recovery in commodity prices and we still expect the Fed to continue its hiking cycle next year, which dampens the relative attractiveness of NZD”.

“We have changed our forecast slightly as we see monetary policy divergence gradually driving NZD lower over our forecast horizon. However, in the short term, as we see the current risk market sell-off as temporary and do not believe in a Fed hike this year, we expect to see a temporary rebound in NZD once uncertainty fades. We see NZD/USD at 0.74 in 1M, 0.72 in 3M, 0.70 in 6M and 0.69 in 12M”.