ANZ's New Zealand Dollar Forecasts For 2024 See Strength Against Dollar, Ongoing Weakness vs. Pound

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The New Zealand Dollar is set to embark on a recovery against the U.S. Dollar in 2024 according to research from one of New Zealand's biggest financial institutions.

ANZ Bank says NZD has room to rise in 2024, "but not without volatility", particularly given some uncertainty surrounding the Reserve Bank of New Zealand's next moves on interest rates.

Nevertheless, the bigger picture is one that is supportive of the risk-sensitive Kiwi Dollar.

"A global return of risk appetite and the NZD’s high carry advantage will drive the upside we expect into 2024," says ANZ in a year-ahead outlook note.

"A positive cyclical outlook bodes well for high beta currencies like NZD," it adds.

The New Zealand Dollar has been one of the better-performing major currencies heading into year-end, courtesy of the improved investor sentiment linked to growing expectations that the Federal Reserve will be able to cut interest rates in the coming months.

According to ANZ, this recent outperformance can extend against the U.S. Dollar over the coming months.

However, the Pound is tipped to defy NZ dollar strength as it will also advance against the U.S. currency and frustrate expectations for a dip back below 2.0 in GBP/NZD. 

"Though the growth outlook remains challenging, recent data suggest the economy may be turning a corner," says ANZ on the UK economic outlook. As a result, analysts say the Pound, "is not to be underestimated".

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Question marks over the path adopted by the NZD hang over whether or not the RBNZ will raise interest rates again.

Market pricing shows investors are not fully positioned for another move, but data due for release ahead of the February decision could yet sway the central bank into action.

Currency analysts warn that a rate rise will likely lead to a selloff in the NZD/USD, as we have seen after previous hikes. "The prospect that further tightening could heighten the risk of a recession will weigh on the currency."

All considered, ANZ's New Zealand to U.S. Dollar forecast for the end of March 2024 is 0.62, 0.62 by end-June, 0.63 by end-September and 0.63 by year-end. The exchange rate is currently at 0.6258.

ANZ's Pound-Dollar forecast profile reflects an expectation that the UK economy has turned a corner, with 1.30, 1.32, 1.33 and 1.34 pencilled in for the aforementioned time points.

This translates into a Pound to New Zealand Dollar forecast profile of 2.10, 2.13, 2.10 and 2.13.