© Vassili Serebriakov
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Our evaluation for the Kiwi would be that it is trading rather cheap in terms of the fundamental levels. Moreover, despite John Key's recent statement about the possible exchange rate, which could work the best at this point, our longer-term view, according to our Equilibrium model, predicts the currency to hover near 0.77. On the other hand, some of the short- term technical drivers suggest the New Zealand's currency to trade at even stronger benchmark. Therefore, we would expect a correction to the upside towards 0.81, since the recent weakness looks to be overdone in that case.
What will be the main factors which will determine future performance of the NZD?
I believe that a lot of potential headwinds will have to do with the global risk backdrop. Our base-case scenario is that the Federal Reserve will tighten the monetary policy gradually, which should leave the risk generally supported. The New Zealand Dollar still has the most attractive carry in the Group of Ten. Hence, in case we have reasonably firm risk appetite, there will be buyers amid weakness of the currency, just from the point of view that it gives investors the best return.
Where do you see the NZD/USD currency pair at the end of Q4?
We foresee the Kiwi trading at the 0.82 level against the US Dollar at the end of the fourth quarter.