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12 Sep 2013
Flash: Is the NZD/USD overvalued? – BTMU
FXstreet.com (Lisbon) - The NZD has outperformed earlier today with NZD/USD rising towards 0.8150, notes the BTMU Research Team.
Key quotes
Indeed, “the NZD has derived support from the RBNZ’s monetary policy meeting overnight at which it signaled to the market that it now plans to begin raising its key policy rate earlier than previously expected. The RBNZ’s updated forecast profile for the 90-day bank bill rates implies that the key policy rate is likely to be raised three months earlier in June 2014 by 0.25 point.”
“The bank bill rates forecast profile from late 2014 onwards was also raised by around 0.50 point implying that the RBNZ now expects the key policy rate to end 2014 at around 3.25%. The interest rate market was already expecting the RBNZ to begin hiking its key policy rate even earlier in 2014, but has been further encouraged to discount more aggressive tightening ahead.”
“The RBNZ’s hawkish turn follows the recent implementation of macro prudential measures to dampen rising house prices which the RBNZ judges will be worth 0.30 point of tightening. RBNZ Governor Wheeler reiterated that the overvalued New Zealand dollar remains a problem saying it is significant concern. The RBNZ appears poised to be the first G10 central bank to begin raising its key policy rate, which should provide support for the NZD.”
However, “we still judge that it remains vulnerable to the downside as global financing conditions continue to tighten given New Zealand’s elevated current account deficit while it is already the most overvalued G10 currency.”
Key quotes
Indeed, “the NZD has derived support from the RBNZ’s monetary policy meeting overnight at which it signaled to the market that it now plans to begin raising its key policy rate earlier than previously expected. The RBNZ’s updated forecast profile for the 90-day bank bill rates implies that the key policy rate is likely to be raised three months earlier in June 2014 by 0.25 point.”
“The bank bill rates forecast profile from late 2014 onwards was also raised by around 0.50 point implying that the RBNZ now expects the key policy rate to end 2014 at around 3.25%. The interest rate market was already expecting the RBNZ to begin hiking its key policy rate even earlier in 2014, but has been further encouraged to discount more aggressive tightening ahead.”
“The RBNZ’s hawkish turn follows the recent implementation of macro prudential measures to dampen rising house prices which the RBNZ judges will be worth 0.30 point of tightening. RBNZ Governor Wheeler reiterated that the overvalued New Zealand dollar remains a problem saying it is significant concern. The RBNZ appears poised to be the first G10 central bank to begin raising its key policy rate, which should provide support for the NZD.”
However, “we still judge that it remains vulnerable to the downside as global financing conditions continue to tighten given New Zealand’s elevated current account deficit while it is already the most overvalued G10 currency.”