Recent NZD/USD price action has done little to change our view. With the positive NZ economic story increasingly ‘in the price’, and the USD still expected to grind higher from here, we remain comfortable with the idea that additional upside in the NZD/USD is limited. Our year-end forecast is still 0.7800, although we reiterate the upside risk attached to this forecast. Indicative of such, NZD/USD ‘fair-value’ has recently increased to 0.8100- 0.8500. Where there may be cause for changes to our NZD view is in some of the crosses. The ‘green shoots’ of economic recovery in Europe and the UK suggest there is now less of a case for marked NZD/EUR and NZD/GBP appreciation from here. The success of ‘Abenomics’, meanwhile, means expected NZD/JPY appreciation may now be limited to around 80.00. In contrast to the above, the strengthening fundamental outlook for the NZD/AUD means a push into the nervous ‘nineties’ now looks likely.
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