Economists at Westpac expect that safe-haven demand will give way to a period of US dollar weakness over the year ahead, with a related rise in the New Zealand dollar and other commodity currencies. However, the potential for gains relative to the Australian dollar looks limited, with the NZD/AUD set to hold around current levels.

US dollar to trend down over the coming year

“We expect that the recent period of safe-haven demand will give way to US dollar weakness, with a sharp slowdown in US consumption and investment spending expected over 2023. Consistent with that, we expect to see the US dollar trending down over the coming year.”

“Underpinned by weakness in the US dollar, we expect the New Zealand dollar will rise to 66 cents by year’s end, with a further lift on the cards through 2023.”

“We expect the AUD/NZD pair will remain around the 0.90 level through 2023, with limited scope for a break to the upside despite the prospect of a sharper deceleration in growth for Australia.”