The New Zealand dollar looks set to be one of the stronger-performing currencies over the coming months, even if not the top dog. Economists at Westpac expect it to rise slightly on a trade-weighted basis over the next year, supported by improving global risk appetite and firmness in commodity prices.

Kiwi to benefit from less risk-averse investors

“We expect the NZD/USD pair to rise further over the next year, reaching up to 0.76 and remaining there over the course of 2022. Our view assumes lingering softness in the US dollar, combined with particular strength in commodity-driven currencies, such as the Australian dollar and to a lesser extent the New Zealand dollar.”

“As we move deeper into the global recovery, risk appetite is likely to strengthen further and risks related to COVID-19 will fade, both of which will support risk currencies at the expense of the US dollar. In terms of general momentum, while the US economy is set to grow slightly faster than the global average in 2021, we expect it to slow to below-average again in 2022.” 

“Financial markets expect that central banks both here and overseas will look through a spike in inflation this year and that they will keep interest rates low for some time to support the economy’s recovery.”