Citi has raised concerns about the potential impact of the upcoming US presidential election in November on high-beta currencies, predicting that the New Zealand dollar (NZD) will underperform.
According to Citi, as the election approaches, the financial community is likely to see increased risk-off, which traditionally does not bode well for high-beta currencies like the NZD.
The Reserve Bank of New Zealand’s (RBNZ) recent decision to begin easing monetary policy has increased the asymmetric risk facing the NZD, with Citi predicting that the NZD’s recent recovery against the US dollar (USD) will end before reaching $0.61/NZD.
The firm expects the pair to potentially decline to a 2023 low of around $0.58/NZD in the coming months.
Additionally, the NZD’s performance against the Japanese Yen (JPY) is also under scrutiny, with Citi’s analysis suggesting that it has reached a long-term plateau, meaning that any future bounce is unlikely to push the currency pair above its 200-day moving average, which currently sits at around ¥92/NZD.
Citi’s forecast reflects a cautious approach to the New Zealand dollar in the context of global political events and central bank decisions.
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