The New Zealand dollar advanced notably for the second consecutive month with the US dollar weakening notably versus commodity-linked G10 currencies. In the view of economists at MUFG Bank, NZD support through commodities is unlikely to be sustained.

Downside growth risks related to China

“The traction for NZD from the RBNZ acting more aggressively by moving by 50bps is no longer the FX support vs USD that it was given the market is now so aggressively positioned for larger rate hikes from the Fed.”

“The risks in Asia with New Zealand exporting over 60% to the region means downside growth risks related to China.”  

“We see risks of a correction over the short-term and slowing global growth will limit the scale of upside.”