Kiwi Dollar Rallies on Optimism About Chinese Market

On the eve of Saturday, the New Zealand Dollar as well as other Asia-centered currencies rose in response to speculation that China may relax its zero-Covid policy position. Chinese equities market strength was mirrored in the strengthening of the Australian and New Zealand Dollars, two G10 currencies that have historically had a favorable association with China confidence.

Dr. Guang Zeng, a retired senior official at the Chinese Center for Disease Control and Prevention (CDC), delighted Chinese markets when he predicted “fundamental shifts” to the existing zero-COVID policy would occur “before spring.”

The remarks were delivered at a Citi-hosted seminar. Mark Haefele, Global Wealth Management Chief Investment Officer at UBS AG, opines, “Further public remarks from authorities and a changing mindset in favor of future reopening are a definite good indication for reopening.” Australia and New Zealand, whose economies rely significantly on Chinese trade, would profit from a Chinese economic recovery connected to a complete resumption of business activity.

On Friday, it was also revealed that China is embarking on measures to eliminate a mechanism that penalizes airlines for importing virus infections. As per a report, the State Council of China, which controls the country’s administrative procedures, has lately instructed government institutions, such as the civil aviation authority, to plan for the end of the infamous circuit-breaker system.

This is especially pertinent for New Zealand, whose education industry gains significantly from the presence of Chinese students. The revelation on Friday followed speculations from prior week that a new agency will be created to handle the country’s transition from zero-Covid.

On account of the rumors, stocks and currencies tied to Chinese economic growth rose dramatically. In response to recent events, the New Zealand Dollar strengthened by two-thirds of a percentage versus the US Dollar to reach 0.5803.

Versus the Pound, a rise of one-third of one percent was observed, with the Pound to New Zealand Dollar exchange rate quoted at 1.93, bringing bank exchange rates to roughly 1.8759 and those at aggressive independent payment processors to roughly 1.9240.

The New Zealand Dollar rebounded throughout the month of October after experiencing severe falls in September. As per the performance dashboard, the New Zealand dollar has been the top-performing major currency over the last month, in large because of the Reserve Bank of New Zealand’s ‘hawkish’ policy changes in October.

“The NZD gained, underpinned by the increasingly hawkish RBNZ policy statement, the rise in risk appetite, as well as some month-end purchasing on the introduction of NZGB in the WGBI,” writes BNZ analyst Jason Wong.
Going forward, Wong anticipates that the New Zealand dollar will continue to beat the British pound: The confluence of an energy shortage and budgetary restraint under the incoming administration portends difficult economic times, according to Wong.

“The policy stance is unstable, and the cross scenario is unknown,” he continues. BNZ’s predictions imply a greater upside for the New Zealand Dollar versus the Pound “from here” than negative.