NZD/USD: RBNZ aggression will weigh on currency – MUFG

The kiwi is the 2nd worst performing G10 currency in May after the RBNZ took further steps today to ease its monetary stance and hint at further action still, economists at MUFG Bank inform.

Key quotes

“The QE program was increased from NZD 33bn to NZD 60bn although these figures are more limits rather than targets.”

“The RBNZ hinted at the possibility of negative rates going forward. [...] Realistically, the prospect of negative rates might only become a reality if there was a view that the main policy tool – QE – was going to reach its limits.”

“The actions of the RBNZ will mean the scope for any notable move higher in NZD is limited for now.”

“We have a roughly flat forecast profile over the initial period ahead before NZD/USD rises to 0.6400 by end Q1 2021.”