NZD: Surprise resilience - ANZ

The New Zealand dollar has surprised many with its resilience over recent months as its strength has been in the face of the disappearance of interest rate differentials versus the US, higher volatility on global markets, and the recent threats of global trade wars, explains the research team at ANZ.

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“Elevated commodity prices, a still decent domestic growth signal, and relatively robust structural metrics (by New Zealand’s standards at least and with the exception of household debt) perhaps explain this resilience. However, the USD is also out of favour currently due to concerns over its ‘twin deficits’ – large and increasing deficits on both the fiscal and trade fronts – and it has been this theme that has arguably been the biggest driver. But we are not convinced this will persist, particularly as global liquidity continues to tighten, which should eventually put the NZD back on the defensive.”