UBS suggest that "the external drivers of......>

KIWI: UBS suggest that "the external drivers of the depreciation of the NZD

include higher U.S. rates, trade tensions, EM tensions & a fall in milk prices.

But these drags have largely run their course, in our view. The NZD has bounced

since phase 2 of tariffs was announced indicating that much of the news was

already priced. As these issues fade, the undervaluation of the NZD can reverse.

The RBNZ was surprisingly dovish at the August MPS, choosing to emphasise the

downside risks to its base case and the chance of 100bps of easing should growth

slow. But Q2 GDP recorded a sharp bounce, double the bank's expectations. While

some of the bounce was due to one-off factors, there were also one-off drags,

which will give back in Q3. Against this growth backdrop, coupled with slowly

rising inflation, it is hard to see the RBNZ becoming even more dovish. To be

sure, the ongoing falls in business and consumer confidence will likely keep the

bank on the dovish side but we do not expect them to cut rates. We exp. NZD/USD

to appreciate to $0.72 vs the USD by end-19. The worst of the global

depreciation pressures on the currency are likely behind us. With domestic

capacity constraints building, we expect the RBNZ to hike rates in Nov. '19."