Economists at ING believe that the New Zealand dollar is set to enjoy a successful year in 2022. They forecast the NZD/USD rising gradually towards the 0.74 level throughout next year.

Counting on a strong domestic story

“We think markets will have to scale down tightening expectations for 2022, but signs of persistent inflation throughout the year should fuel speculation that the tightening cycle will have to continue in 2023-24, and put a floor below NZD. The currency should have the most attractive carry in G10 in the year ahead and should therefore benefit more than others from periods of low volatility a supported risk sentiment.”

“The RBNZ tightening should be supported by the strong domestic economy story. A rebound in tourism and education are set to give an extra boost to the economy.”

“Milk and forestry prices (the two main exports) are still considerably higher than in the last five years, and even in case of a correction in 2022, the exporting industry should continue to underpin the recovery. A big downside risk for NZD in 2022 is, however, China-related sentiment, which remains quite uncertain amid government crackdowns on some sectors and a potential economic slowdown.”

“We expect NZD/USD to rise gradually to 0.74 in 2022.”