Bank of America Sees Opportunity in Hawkish RBNZ Policy
Bank of America has updated its foreign exchange outlook, advising clients to buy NZD/USD in anticipation of a hawkish Reserve Bank of New Zealand (RBNZ) policy. The bank's USD outlook depends on both US Treasury and Federal Reserve policy credibility, with accommodative financial conditions suggesting short USD versus high beta foreign exchange is likely to perform.
The firm expects the Treasury not to abandon its efforts to contain borrowing costs, including foreign exchange intervention and long-end buybacks. Bank of America recommends buying NZD/USD with an entry at 0.59.57, a target of 0.62, and a stop at 0.58.
The bank's bullish outlook on the New Zealand dollar is driven by expectations of two rate hikes from the RBNZ. Weather-driven risks to global food supply chains also support the NZD/USD outlook, according to Bank of America.