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Fundamental Evaluation Series: NZD/USD vs. 2-year yield spread

The chart above shows, how the relationship between NZD/USD and 2-year yield divergence has unfolded since 2015.
 

While the spread has narrowed steadily from +300 basis points (bps) in January 2015 to -106 bps as of September 2018, the New Zealand dollar has been pretty volatile around the spread. However, from the chart, it’s quite clear that the direction of the spread is playing a crucial role over the medium to long term.

We have forecasted a lower NZD against the USD with a target of 0.59 against the USD over the medium to long term, and with the Reserve Bank of New Zealand (RBNZ) continuing its dovish rhetoric, we expect the spread to decline further in favor of the USD.

As the spread started narrowing in favor of the New Zealand dollar since September, the New Zealand dollar rose against the USD. Since September, the spread has narrowed from -112 bps to -80 bps as of March, as the Kiwi is up from 0.65 area to testing the 0.69 resistance area.

However, as RBNZ reduced rates by 25 bps n April, the spread has once again widened to-84 bps and the New Zealand dollar declined to 0.658 against the USD.

In June, the spread has continued to narrow and rose to -62 bps, while NZD/USD consolidating around 0.662 area.

 

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July 2 15:00 UTC Released

DKCurrency Reserves

Actual

449.6 Stale

Forecast

Previous

451.7 Stale

July 2 13:45 UTC Released

USISM NY Biz Conditions

Actual

50 %

Forecast

Previous

48.6 %

January 31 00:00 UTC 766026766026m

ARAnnual Primary Balance*

Actual

Forecast

2016 bln ARS

Previous

Bln AR bln ARS

January 31 00:00 UTC 766026766026m

ARAnnual Primary Balance*

Actual

Forecast

2016 bln ARS

Previous

Bln AR bln ARS

January 22 19:00 UTC 777846777846m

ARTrade Balance

Actual

Forecast

Previous

-1541 %

January 31 00:00 UTC 766026766026m

ARAnnual Primary Balance*

Actual

Forecast

2016 bln ARS

Previous

Bln AR bln ARS

January 22 19:00 UTC 777846777846m

ARTrade Balance

Actual

Forecast

Previous

-1541 %

January 31 00:00 UTC 766026766026m

ARAnnual Primary Balance*

Actual

Forecast

2016 bln ARS

Previous

Bln AR bln ARS

January 31 00:00 UTC 766026766026m

ARAnnual Primary Balance*

Actual

Forecast

2016 bln ARS

Previous

Bln AR bln ARS

January 31 00:00 UTC 766026766026m

ARAnnual Primary Balance*

Actual

Forecast

2016 bln ARS

Previous

Bln AR bln ARS

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