Remarks from MS on the kiwi dollar, the bank citing Fed tightening for their bearish NX $ view
- "There's a broad basket of highly levered household sectors, which include Australia, New Zealand, Canada and Sweden, which will all be negatively impacted by Fed tightening."
- Economies such as New Zealand "have been most willing to take on cheap financing to boost domestic demand ... As these trends unwind, we see these highly levered household currencies underperforming."
- Rate differentials also weighing (RBNZ cash rate at 1.75% matches upper bound of the Fed's target range, but US rates to be higher in the next 12 months)
Morgan Stanley forecaststs NZD to 66 cents by year-end
Via Bloomberg, more here for the NZD traders
Another one and a half -odd cents to go ...
it might be better to focus on those other currencies MS mention in terms of ban for buck. AUD fits the high household leverage argument well ... slow wage growth weighing on consumption and the economy (I been banging on about this for a while and so far the AUD has held in there OK).
