Is the NZD over-valued? – BNZ

Jason Wong, Currency Strategist at BNZ, notes that the NZD has come under-pressure in the past week amidst a plunge in risk appetite and the recent price action highlights the importance of the global monetary policy outlook for the NZD.

Key Quotes

“To meet our year-end target of USD0.70 we need to see more intent from the Fed on rate hikes and further falls in risk appetite.

The NZD is strong and remains a little over-bought in the short-term but is not particularly over-valued in a longer term context. Economic fundamentals remain supportive for the NZD and there is a lot to like about the currency.

The RBNZ has softened its language on the NZD over recent Statements but we generally disagree with the Bank’s constant refrain that the NZD is high, a significant headwind for the economy and needs to depreciate. Our valuation metrics, NZ’s better than average external accounts and robust levels of business confidence would suggest otherwise.”