What Major Banks Forecast for the New Zealand Dollar in 2022
A bank forecast for the New Zealand Dollar (NZD USD) usually differs between banks and changes from month to month. This article looks at the general trend in NZD USD forecasts from the big 4 banks.
Bank forecasts for the NZ Dollar
Banks expect the New Zealand Dollar (NZD USD) to slowly rise above 70 US cents in 2022. However, bank experts agree there are many risks that could impact the accuracy of this prediction next year.
Although the easing of lockdowns and better weather for commodity exports is helping New Zealand's economy going into next year, international borders are expected to only open up slowly to neighbouring countries due to coronavirus.
New Zealand will therefore continue to struggle, because the country relies on tourism for more than half of it's exports. This means that while the average forecast shows the NZD improving in 2022, things could turn negative very quickly.
Fortunately, banks predict the US dollar will remain weak in 2022, which should provide some level of support to the NZD.
How will coronavirus affect exchange rates?
Uncertainty from the coronavirus pandemic increases volatility in currency markets. Generally, safe-haven currencies like the USD, CHF and JPY could move higher. However, commodity currencies such as the AUD, NZD, CAD and ZAR exchange rates could fall.
Currently, the reverse is true. The USD is falling, which is supporting commodity currencies including the NZD.
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Will the NZD get stronger in 2022?
Let's examine the 5 reasons the NZ dollar could weaken more than expected:
- Coronavirus pandemic impacts New Zealand's economy, plus tourism and imports/exports take a huge hit
- China’s economic growth slows even more than expected from the coronavirus pandemic, reducing China trade and lowering demand for NZ imports
- New Zealand's economy continues to slows, the Reserve Bank of New Zealand cut interest rates earlier than expected, devaluing the NZD
- Economic growth countries outside of New Zealand slow down and inflation only slowly and gradually picks up, increasing the chance of interest rate cuts elsewhere
- The coronavirus pandemic is controlled, the US economy picks up and the Federal Reserve (central bank) increases interest rates, supporting the USD
What are the key influences on the NZD exchange rate?
1. New Zealand Economy
The New Zealand economy is under pressure from the coronavirus pandemic. Domestic economic weakness can lead to a weaker NZD. Unfortunately, a slower global growth environment will also impact the domestic economy negatively.
2. New Zealand Politics
The political scene (delay in electing a new prime minister) in New Zealand has generated uncertainty. Greater uncertainty from politics means investors will sell the NZD. Particularly, if government policies are deemed as ineffective for tackling the coronavirus crisis or unable to stimulate economic growth.
3. Other Currencies
The US dollar (USD) has a significant influence on the New Zealand Dollar. Generally, when the USD gets stronger, the NZD is relatively weaker and vice versa.
NZD to USD
NZD bank forecast currency pairs
NZD to GBP forecast
The NZD GBP cross rate will largely be at the whim of coronavirus and Brexit developments and will therefore continue to be volatile near-term. Currently the NZD GBP is trading around 0.5076. Longer term outlooks suggest the NZD GBP currency pair could remain around 50 cents by the end of 2020.
Related Article: British Pound GBP Bank Forecast 2020
NZD to EUR forecast
The NZD EUR cross rate has moved 3.5% higher to about 0.5700 from 0.5524 in the beginning of August. Unfortunately, major banks think the NZD EUR cross rate could fall again in 2020, towards 0.5500 by the end of the year.
Related Article: Euro EUR Bank Forecast 2020
NZD to JPY forecast
The NZD JPY exchange rate has been choppy since the beginning of the year, currently settling around 0.9234. For 2020, the major banks are expecting the NZD AUD to stay around 92 NZ cents to the Aussie dollar or move slightly lower.
Related Article: Japanese Yen JPY Bank Forecast
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By
Natalie Robertson
Updated June 3rd, 2021