During December, the kiwi reached levels last seen in 2011, but was unable to sustain them. NZD/JPY is the currency pair of the year. On one hand, a relatively hawkish statement by the RBNZ pushed the pair higher, but a weak GDP figure and a big current account deficit kept the pair from rising.
During January, the important figures to watch are the release of CPI in the middle of the month and the rate decision at the end of the month.
* This article is part of the January 2013 monthly forex report. You can download the full report by joining the newsletter in the form below.
New Zealand enjoys a non-zero interest rate of 2.5%, and it seems unlikely that the RBNZ will lower this rate anytime soon. The recent statement did express some dissatisfaction by the value of NZD but had a generally positive outlook for the local and global economies.
In addition, New Zealand enjoyed the announcement about QE4 in the US: more USD that flows into risk currencies and commodities is certainly positive for the kiwi. And even if “QE Infinity” is not really going to infinity and perhaps not even up to 2014, this will likely continue boosting NZD, even as the US economy improves.
The economy probably improved in Q4, as Q3 was weak: the economy grew by only 0.2%, half the early expectations. In addition, Q2 growth was revised to the downside.
CPI is of high importance now as it will impact the next rate decision: CPI is released only once per quarter in New Zealand. Any uptick in inflation will make the tone more hawkish.