Analysts at ANZ Bank continue to assume that NZD/USD appreciates towards 0.72 before levelling off over 2022. However, the risks to that not being achieved are increasing as markets weigh up fresh COVID-19 risks, the prospect of an accelerated Fed tapering profile and generalised late-cycle risks to the global growth outlook.

NZD/USD forecast of 0.72 does look somewhat challenging

“Our FX forecasts continue to assume that NZD/USD appreciates towards 0.72 before levelling off over 2022. That forecast is based on New Zealand’s clear (and growing) interest rate advantage and still elevated terms of trade.” 

“We acknowledge that the RBNZ’s more considered tone, prospects for an accelerated Fed taper, and risks around global asset prices do pose downside risks to our forecasts, but we are also mindful of the seasonal tendency for the kiwi to appreciate in December, the high cost of shorting the NZD, and the still positive tone of the data flow in New Zealand (even if future surprises are harder to come by).”