The NZD is likely to remain torn between support from RBNZtightening expectations and resistance from a stronger USdollar. Last week at the OCR Review, the RBNZ reiterated its intentionto hike in 2014, and Governor Wheeler repeated that line overthe weekend to the media. Such constant reminders will keep theNZD supported into next year.Against that, the US dollar appears likely to continue last week’srebound, mainly because it has been battered so much during thepast few months, and also because sentiment towards the USeconomy has become extremely downbeat. Accordingly, the USdollar is ripe for a decent near term rally. However, longer term, USfiscal risks will keep Fed tapering at bay until well into Q2 2014.Near term, the US dollar’s pull should dominate, putting 0.8190at risk. Longer term, we target 0.8600 by Mar-14.
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Westpac