NZ politics impact on NZD is waning - Westpac

During the past three weeks NZD/USD has firmed slightly even though fair value has declined and one explanation is that the election-related discount, which started to be applied in mid-Aug and grew to 6%, is starting to dissipate, according to Imre Speizer, Research Analyst at Westpac.

Key Quotes

“At 4% currently, it may shrink a bit further but we don’t expect to return to zero near term. That is because there remains much uncertainty on what policies will be executed by the new NZ government during the months ahead.”

“We still expect the USD (and/or NZ-US interest rate spreads) will be the dominant medium term driver of NZD/USD. A break below 0.6820 will signal an eventual move to 0.6800 by year end.”