The NZD/USD currency pair saw a significant increase of 0.8% overnight, reaching a closing level of 0.6252, its highest since the beginning of the year, according to DBS Senior FX Strategist Philip Wee.
Predictions for NZD/USD Growth
Wee predicts that NZD/USD could reach the 0.6320 level by the end of 2023, fully recovering from losses incurred earlier in the year. He notes that technically, the currency pair has broken above the primary psychological resistance level of 0.62 for the year.
He attributes the recent rise in NZD/USD to the anticipation of a rate cut by the Federal Reserve at their September 18 meeting, following a recent interest rate cut by the Reserve Bank of New Zealand on August 14.
Additionally, speculators have reduced their net short positions after selling off their six-year high net long positions in JPY carry trades over the past two months, according to CFTC data.
Analysis and Implications for Investors
Investors should take note of the recent surge in NZD/USD and Wee’s predictions for continued growth. The weakening of the US dollar, coupled with anticipated rate cuts by central banks, could further drive up the value of the New Zealand dollar against the US dollar.
Those with investments in NZD/USD or related assets may benefit from this upward trend, while those with exposure to the US dollar may want to consider hedging against potential losses.