The RBNZ have record-high employment data and inflation pressures. New Zealand Q3 inflation has risen at its fastest pace in 10 years with the annual inflation rate moving up to 4.9% from 3.3% in the second quarter. The Unemployment rate is down to near record lows at 3.4%. Employment up 2% and the participation rate higher too. Westpac now expects the RBNZ to move interest rates up to 3% in 2023. ANZ is forecasting the RBNZ to raise interest rates to a 2.0% neutral rate by the end of 2022. This means there is a clear buy bias for the NZD.
The huge fall in the JPY has been due to all the world’s central banks being expected to raise interest rates to counter surging inflation. The one central bank that is not expected to respond is the BoJ. This means that there is a large central bank divergence between the BoJ and the RBNZ.
Check out the strong seasonals too.
Over the last 10 years, the NZDJPY has risen 80% of the time between November 10 and December 31 with an average return of 3.42%. The largest gain was in 2012 with a 10.56% rise. The largest loss was in 2018 where NZDJPY registered a -3.91% loss.
Major Trade Risks: A sharp change in the outlook for New Zealand could change this outlook.