ANZ: A Wobbly Start

ANZ note that “the USD has been the main beneficiary of higher global bond yields. This isn’t really surprising given that it has been a ratcheting up of policy rate hike expectations in the U.S. that have been the main driving force. The DXY index hit a 18-month high in January, and that hurt the NZD.”

• “The NZD is being buffeted by opposing cross-currents. Commodity prices are booming and the recovery remains robust. Annual inflation has risen sharply (to 4.9%) and the unemployment rate has fallen to a modern-era record low of 3.2%. This has, in turn, cemented the need for RBNZ to lift the OCR. While higher interest rates are normally a positive, it’s less so when other countries are also raising rates. Additionally, fears of a “hard landing” and housing market vulnerabilities are weighing on the NZD.”
• “2021 was a “bad” year for the Kiwi. But having fallen from a high of $0.746 in January 2021 to a low of $0.653 in December, we think it’ll fare better in 2022. While we recently downgraded our forecasts for the NZD and AUD by a few cents, both are expected to appreciate from here, but to a lesser degree, with the NZD expected to climb gradually to $0.70 by year-end.”