Citigroup has expressed concerns about the potential impact of the upcoming US presidential election in November on high-beta currencies, and expects the New Zealand dollar (NZD) to underperform.
According to Citigroup, the financial environment is likely to see increased risk aversion as the election approaches, which traditionally does not bode well for high-beta currencies like the New Zealand dollar.
The recent decision by the Reserve Bank of New Zealand (RBNZ) to begin monetary easing has added to the asymmetric risks facing the New Zealand dollar. Citi expects the recent NZD/USD rally to stall before reaching $0.61/NZD.
The company expects the currency pair to fall to its lowest level in 2023 at around $0.58/NZD in the coming months.
Additionally, the performance of the New Zealand dollar against the Japanese yen is also under scrutiny. Citigroup analysis suggests that the New Zealand dollar has reached a long-term ceiling, suggesting that any future bounces are unlikely to push the currency pair above its 200-day moving average, which is currently around 92 yen/NZD.
Citi’s outlook reflects a cautious stance on the New Zealand dollar in the context of global political events and central bank policy decisions.
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