Citi expressed concerns over the potential impact of the upcoming November US Presidential election on high-beta currencies, predicting that the New Zealand Dollar (NZD) will underperform.
According to Citi, the financial environment is likely to see increased risk avoidance as the election approaches, which traditionally does not bode well for high-beta currencies like the NZD.
The Reserve Bank of New Zealand's (RBNZ) recent decision to commence monetary easing has added to the asymmetrical risk facing the NZD. Citi anticipates that the recent rebound of the NZD against the US Dollar (USD) will cease before reaching USD0.61/NZD.
The firm expects the currency pair to potentially fall to its 2023 low of around USD0.58/NZD over the coming months.
Additionally, the NZD's performance against the Japanese Yen (JPY) is also under scrutiny. Citi's analysis suggests that the NZDJPY has reached a long-term ceiling, indicating that any future rebounds are unlikely to push the currency pair above its 200-day moving average, which currently sits at approximately ¥92/NZD.
The forecast by Citi reflects a cautious stance on the NZD in the context of global political events and central bank policy decisions.
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