NZD/USD is heavy again today,

ANZ comments are a useful background to the losses for the kiwi:

global liquidity cycle tightening

  • global growth moderating and becoming less synchronised
  • volatility shifting into a structurally higher regime
  • we are moving into an environment that will be more difficult for cyclical currencies
  • coming at a time when the NZD's yield advantage has already been eroded

The domestic economic picture remains reasonable and does still need to be respected

  • Growth is expected to hold around trend and the terms of trade are hovering near all-time highs
  • External imbalances - the NZD's traditional Achilles Heel - are hardly alarming
  • This should limit the downside. However, domestic considerations are taking a backseat to global ones at present

On the crosses, our strongest views are for NZD underperformance against the 'funding' currencies of the EUR and JPY, although we see NZD/GBP weakness too

  • Against the AUD, the NZD has reached levels that look attractive to initiate shorts, but only in the context of a broad range-trading environment.