The decision of the Reserve Bank of New Zealand (RBNZ), which kept its interest rate unchanged while it introduced a Financing for Loans Program (FLP), boosted the kiwi in the market. MUFG Bank analysts estimate that it will continue to appreciate.
Key statements:
Given the current context of a vaccine that could solve the COVID-19 pandemic in 2021, investors are more likely to take an optimistic assessment of the action. The RBNZ, as expected, launched a Loan Financing Program for a total of NZD 28 billion, with these loans offered at the current rate (OCR – benchmark rate). However, the RBNZ outlook for 2021 improved, with real GDP now projected at -4.0% compared to the -5.8% expected in August. The peak of the unemployment rate is expected to be 6.4% and not 8.1%, estimated in August ”.
“New Zealand’s 2-year government bond yield has risen 10 basis points as negative rate expectations have been lowered.”
“The NZD / USD seems to be returning to the range of 0.7000-0.7500. We doubt this raises too much concern within the RBNZ given the optimistic outlook for 2021 and given that the NZD, on a TWI basis, has been trending down for six years and is 12.5% below the peak in 2014. SWhenever the advance of the NZD is not fast, there is scope for more raises from here“.
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Credits: Forex Street
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