Investing.com – The New Zealand dollar fell after the Reserve Bank of New Zealand cut interest rates earlier this week, and UBS expects the currency to fall further against the US dollar.
The Reserve Bank of New Zealand cut its policy rate by 50 basis points to 4.75% at its meeting on Wednesday, an outcome in line with market expectations.
Analysts at UBS said in a note dated October 9 that the cut was due to a planned monetary policy review, meaning there was no press conference or statement.
“But we believe that the accompanying brief media statement enhances the prospects for another significant cut in November (50 basis points),” the Swiss bank said. “Furthermore, we expect a sequential cut in the cash rate over 2025 (25 basis points of easing per quarter) with the cash rate reaching 3.25% by the end of 2025 – a level that is broadly in line with the central bank’s estimates of neutral. “
In contrast, the Fed has begun to back away from expectations of large interest rate cuts, and recent data confirms its position. More importantly, global interest rate market participants were calculating more extreme easing expectations just a few weeks ago.
“We expect the New Zealand dollar to underperform most G10 currencies over the next six to 12 months, even the US dollar,” UBS said. “We reiterate our forecast for a rate fall to 0.58 by the end of the year, although we see downside risks to this estimate as we now expect a 50 basis point cut in November (previously 25 basis points).”
At 05:20 ET (09:20 GMT), the NZD/USD pair rose 0.2% to 0.6076, after falling more than 2% over the past week.