NZD/USD likely to reach 0.62 in coming months

The stall in dairy prices last week only slightly damaged the NZD and it has managed to remain inside a 0.6700-0.6900 consolidation range. The RBNZ may give the NZD a slight lift this week within that range. Over the next month, there is scope for NZD/USD to rise above 0.6900, helped by a decent NZ economic data pulse and a contrasting soggy US data pulse.

This week's key NZ event will be the RBNZ's OCR Review. Governor Wheeler will probably restate the policy elements of his speech on 14 October - a hawkish shift from Sep, where he signalled one more rate cut to 2.5% is planned, but also that the buoyant housing market and the need to retain emergency policy ammunition warranted caution.

"Multi-month, the NZ economy is seen slowing, the RBNZ easing is likely in December, and the Fed possibly tightening during the next few months, taking NZD/USD to 0.62. That said, any further delays in Fed tightening will cast doubt on the forecast decline in the NZD/USD", says Westpac.

The 1 year ahead forecast is 0.62, based partly on the OCR being cut to 2.0%.