JPM Roll Bearish NZD Exposure From A Basket To An Outright NZD/USD Short

J.P.Morgan find it peculiar that "the interest rate market, if not necessarily the NZD, is so willing to take the RBNZ at its hawkish word. The market appears to be ignoring not only the uncertainty injected by the failure of NZ's no-COVID policy amidst an insufficient level of vaccination, but also the questionable sustainability of consumption when the savings ratio has already fallen to zero, not to mention past and prospective tightening in macro-prudential policy to tame an admittedly hot housing market. All told we suspect the RBNZ may deliver only half the 150bp+ of hikes it current projects and the market is priced for, opening continued downside for the currency."

• As such, they rolled out of their short NZD leg of an existing basket trade on Friday (as well as the remainder of the basket position which comprised of long USD & JPY vs. short NZD & CAD) and recommended selling NZD/USD at $0.6830 with a stop at $0.6967.