NZD: Fair value around 0.73 levels - ANZ

Analysts at ANZ think fair value for the NZD is around 0.73, led by sound credentials of NZ’s economy, and as a result they have no real qualms with it being at current levels.

Key Quotes

“At face value the big dollar (the USD) is getting a thumping at the hands of BoE and ECB commentators. While the soft USD has contributed somewhat to NZD strength of late, the past few sessions has been all about being left behind, as the rest of the G4 gets the job done. We think fair value for the NZD is around 0.73 and we have long spoken about NZ’s sound credentials, so we have no real qualms with it being at current levels. But the tonal tide is turning in the central bank halls in London, Frankfurt and DC.”

“We are also at the end of a long streak of downside US data surprises, and over the last few days that losing streak looks to be breaking as expectations have been reset. Less loose liquidity is also a threat to the Kiwi and carry trades, leaving us thinking we’re nearing a peak in NZD. Also, today is month-end, and rebalancing flows will likely play a role given contrasting local asset prices. Japanese and NZ equities are up strongly, US equities were pretty flat, but European and UK equities were down. That is suggestive of (but no guarantee of) NZD and JPY selling, and EUR and GBP buying.”