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2 Aug 2013
Flash: NZD valuations vs. FX counterparts – BNZ
FXstreet.com (New York) - On a long-run basis, the NZD is more than one standard deviation overvalued against the AUD and GBP – in contrast, the NZD/USD and NZD/EUR have become less overvalued (at 10% and 2% above their respective LREs), suggests the BNZ Research Team.
Key quotes
“The NZD/JPY is the only NZD pair that is currently undervalued on a long-run basis.”
“If this analysis is to be believed, exporters should be thinking about winding down hedging duration for NZD/GBP and NZD/AUD. On the other hand, importers should be looking at stepping up levels of cover.”
“Less rich long-run valuations for the NZD/USD, NZD/EUR, and AUD/USD in theory portend more upside potential in these currencies. However, negative or neutral cyclical drivers for these pairs mean we’re not forecasting material gains in any of them (and for the AUD we expect declines). The NZD/JPY is the only currency pair with the compelling combination of positive cyclical fundamentals, and an ‘undervalued’ long-run valuation.”
Key quotes
“The NZD/JPY is the only NZD pair that is currently undervalued on a long-run basis.”
“If this analysis is to be believed, exporters should be thinking about winding down hedging duration for NZD/GBP and NZD/AUD. On the other hand, importers should be looking at stepping up levels of cover.”
“Less rich long-run valuations for the NZD/USD, NZD/EUR, and AUD/USD in theory portend more upside potential in these currencies. However, negative or neutral cyclical drivers for these pairs mean we’re not forecasting material gains in any of them (and for the AUD we expect declines). The NZD/JPY is the only currency pair with the compelling combination of positive cyclical fundamentals, and an ‘undervalued’ long-run valuation.”