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Yields Bounce as Equities Make New Monthly Highs

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Bull Rally Accelerates

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Economists Survey Raises 2021 CPI Forecast To 4.9%

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Block, March Quarterly

KIWI
KIWI: VIEW: Kiwibank note that "success in eliminating the virus and moving out
of lockdown earlier, makes NZ the envy of the world... And the sharp bounce in
spending & activity out of lockdown has us growing in confidence. NZD is
reflecting the relative optimism, and has risen sharply towards US$66c. The
recent low of US$55c seems like a lifetime ago. The strength of the NZD flyer
has been supported by a strong terms of trade. Our export prices have held up
relatively well, and our imported prices have eased. But the rising NZD can
quickly undermine the terms of trade boost. The other major driver of the NZD is
interest rate differentials. We talk of RBNZ action, but other central banks are
forced to do more. Our NZD/USD forecasts have barely changed from early in the
year, but the complexities around the forecasts have changed substantially. The
NZD should remain relatively well bid into year end. But we suspect a drop back
into the low 60s in 2021. Further policy action from the RBNZ will assist the
NZD's decline. At US$66c today, the risk is asymmetrically lower. Our year end
forecast of US$67c offers little in the way of upside. As the world eventually
(hopefully) recovers into 2022, we expect the NZD to outperform once again."
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com