• NZ dollar interest rate differentials have surged, raising the risk of a return of the ‘carry trade’.
• We find some evidence to suggest Japanese real money flows into NZ bonds are increasing, supporting NZD/JPY.
• But inflows into US and emerging market bonds are far more significant.
• These trends should broadly continue, leaving us comfortable with our assumption rising interest rates differentials won’t drive the NZD through the roof.
Read the full report: FX Research
BNZ