RBNZ aims to put a ceiling on NZD - Nomura

FXStreet (Bali) - Charles St-Arnaud, FX Strategist at Nomura, suspects that current NZD strength could delay rate hikes or force verbal intervention, limiting upside.

Key Quotes

"The Reserve Bank of New Zealand (RBNZ) has recently opened the door to FX intervention to push NZD toward a more “sustainable” level."

"NZD has been supported by higher commodity prices, expectations of increased rate differentials and investment flows – we do not share the view that it is significantly overvalued."

"At this point, we believe that the RBNZ is likely to limit its actions to verbal intervention."

"However, the lack of significant overvaluation means that we believe any intervention would only have a limited effect, both in magnitude and over time, but the large net long position puts NZD at risk of a correction."

"We believe therefore that further appreciation of NZD will be limited and in fact NZD could even depreciate somewhat."