Crédit Agricole Expects Further Strengthening of the New Zealand Dollar

Last week, the kiwi dollar has eclipsed all other top currencies in performance, paving way for Westpac, Crédit Agricole CIB and other to suggest buying the kiwi dollar in expectation of another round of uptrend in the days ahead. In fact, the New Zealand dollar extended its gain against currencies of all developed and emerging economies including the pound over the last few days, including the greenback which rebounded last week.

The rebound and even outperformance of other currencies is progressively wiping off March losses arisen due to lower than third-quarter 2020 GDP growth and the steps taken by the New Zealand market to remove the support for the heating up housing market.

Imre Speizer, chief of New Zealand dollar strategy at Westpac, stated that the institution will be buying the dips, until the level of 0.7100 does not get broken. The analyst also has a long-term bullish view, anticipating a weakness in the US dollar as world economy recovers further in the months ahead.

Last week, the New Zealand dollar gained over 1% against the US dollar after rallying over 3% in the earlier week as the latter’s broad-based recovery this year has faded in support of commodity prices and other currencies in general. Westpac has cautioned that risks exist on the upside against the backdrop of multiple efforts by the NZD/USD pair to gain ground above 0.72, and is anticipating the NZD/USD to reach the level of 0.76 by 2021.

The result would be bearish for the GBP/NZD currency pair, likely pushing it downwards to 1.84. The GBP/NZD pair faced resistance at 1.95 and traded below 1.9175 last week, reflecting a level hardly seen before January and February’s stunning rally by the pound, with losses mirroring both rare sluggishness of the pound and also the continuing strengthening of the kiwi dollar.

The strength of kiwi dollar, weakness of the US dollar and increasing investor positivity about worldwide economic rebound are major factors against the GBP/NZD pair. Elias Haddad, an analyst at Common wealth Bank of Australia pointed out that whole milk powder (WMP) prices trade at multi-year high and backs the fundamental strengthening of the NZD/USD pair.

The New Zealand dollar’s gain was supported by a 0.4% rise in the price of Whole Milk Powder (WMP), the country’s biggest export product, in the recent GDT (Global Dairy Trade) auction.
Analysts at Crédit Agricole CIB pointed to the internal models of the bank for suggesting additional gains for the NZD/USD in the days ahead.

Valentin Marinov, Credit Agricole’s head of FX strategy, said that the kiwi dollar is trading in the oversold zone, in spite of positive price action in the past week. It could be due to investors liquidating their holdings on rallies. Under the current scenario, in case global risk on sentiment improves, “corrective NZD upside risk stays intact.”

Credit Agricole also took long position in the NZD/USD pair last week, generating 3% returns from the greenback and is now anticipating for a cross over above 0.72 towards the end of April which generally sees the pound, Norwegian krone and the kiwi dollar as the outperformers.