Investing.com – The New Zealand dollar fell after the Reserve Bank of New Zealand cut interest rates earlier this week, and UBS expects the currency to weaken further against the US dollar.
At Wednesday’s meeting, the RBNZ cut the official interest rate by 50 basis points to 4.75%, which was in line with market expectations.
The cut was prompted by a planned monetary policy review, meaning no press conference or announcement was made, UBS analysts said in an Oct. 9 note.
“However, we believe that the accompanying short media release increases the prospects for another massive interest rate cut in November (50 basis points),” the Swiss bank said. “In addition, we expect a sequential reduction in the interest rate over the course of 2025 (25 basis point easing per quarter), with the cash rate reaching 3.25% by the end of 2025 – a level broadly in line with the central bank’s neutral estimate.”
In turn, the Federal Reserve has begun to resist expectations of immense interest rate cuts, and the latest data confirms its position. Importantly, participants in the global interest rate market are pricing in more extreme forecasts of monetary policy easing from just a few weeks ago.
“We expect New Zealand NZD to perform worse than most G10 currencies, even the US dollar, over the next six to 12 months,” UBS said. “We maintain our forecast of a decline to 0.58 by the end of the year, although we see a risk of deterioration in this estimate, as we currently expect a 50 bp cut in November (previously 25 bp).”
At 05:20 ET (09:20 GMT), NZD/USD was up 0.2% at 0.6076, after falling more than 2% over the past week.
