NZD/USD likely to retest the summer’s low below 0.65 over coming months

There are some signs of stability in latest weeks, but the near-term fundamentals points to the downside risks.

An anticipated rise in US interest rates, rising signs of weakness in economy, further domestic policy easing prospects and weak milk prices show alarming headwinds.

"The RBNZ is expected to ease policy further to try and alleviate the downside pressure on its domestic economy from rising unemployment and the deterioration in New Zealand's terms of trade", says Lloyds bank in a research note. 

NZD/USD dropped by around 25% to 0.66 now, after reaching a high of almost 0.9 in mid-2014. The slide in AUD broadly tracked this drop.

"Looking ahead, we expect NZD/USD to retest the summer's low below 0.65 over the coming months. Given the scale of the currency fall, however, and the improving prospects for Australia, a move towards 0.60 should mark the low, with a steady recovery in NZD/USD forecast later in the year", estimates Lloyds Bank.