The fall in the New Zealand dollar over the last few weeks highlights the sensitivity of global markets, but at this stage it doesn’t warrant a reassessment of our inflation or interest rate forecasts. Local news last week was low-key, but there was one release that we feel speaks volumes about the selfsustaining nature of the economic upturn.
Since early May, the NZ dollar has fallen from just shy of 86c against the US dollar to around 81c today. That mostly reflects a resurgence in the USD against all currencies, although the NZD has been hit harder than most (among the majors only the Australian dollar has fallen further). The main catalyst has been a sense that the US Federal Reserve will soon start to scale back its quantitative easing (QE) programme, which was left open-ended when it began late last year.
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