NZD: upside potential could be limited – BTMU

Currency Analyst at BTMU Lee Hardman has assessed the view for the Kiwi Dollar following the RBNZ decision to keep rates on hold.

Key Quotes

“The kiwi’s sharp decline overnight mainly reflects in our view that it is already very overvalued. According to our long-term valuation models, it is the most overvalued G10 currency”.

“Secondly, it has already had a good run at the start of this year and the reversal risk is high in the near-term. If the interest rate market becomes more comfortable about the RBNZ leaving policy unchanged in the year ahead, it should help to limit further upside potential for the kiwi”.

“We continue to favour the Australian dollar relative to the kiwi from a relative monetary policy perspective. The AUD/NZD rate is currently attempting to break above its 200-day moving average at 1.0530. It hasn’t closed above for more than a couple of days since April of last year. If the break is sustained it would send a bullish technical signal”.