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Analysts at UBS say the NZD has navigated the storm and sunnier seas lie ahead.
The call comes amidst a multi-year downtrend in the New Zealand Dollar against the likes of the Euro, Pound and U.S. Dollar, raising the prospect that a turn in trend beckons.
The currency fell to its lowest level in years in early April when markets saw the tariffs announced by U.S. President Donald Trump as being more severe than expected.
But, the prospect of negotiations between the U.S. and trading partners means the door is open to materially lower tariffs and markets are exiting the eye of the storm. To be sure, the waters are choppy, but the worst has passed.
"With China being New Zealand's main trading partner and Trump recently offering a bit of an olive branch, we see a glimmer of hope that the two economic powerhouses are on a de-escalation path," says Wayne Gordon, Strategist, UBS AG.
U.S. overtures to China about whittling down the eye-watering 145% import tariff had been given the cold shoulder until Thursday, when Chinese officials signalled they were ready to begin talking about talks.
"If the U.S. wishes to engage with China, there's no harm in it for China at this stage," said a state-affiliated social media account.
We wrote that this is a supportive development for the New Zealand Dollar, which is highly sensitive to sentiment regarding China and any improvements in the outlook for the Chinese economy and trade would inevitably help underpin the Kiwi Dollar's outlook.
China fleshed out it's willingness to negotiate on Friday, with Beijing’s commerce ministry saying it is "currently evaluating" an offer made by the U.S. to commence trade talks.
A classic risk-on move in global FX follows these headlines, and the New Zealand Dollar is responding. 'Risk on' means investors are feeling good and taking risks, i.e. buying stocks and currencies that have close correlations with equities, such as the AUD and NZD, are benefiting.
UBS says it is raising its NZD/USD forecasts to 0.60 for end-June from 0.58 to reflect the New Zealand Dollar's more constructive outlook.
The New Zealand Dollar's strength through the second half of April has been notable with gains reflecting hopes the trade wars would recede. However, some strategists think risks still exist as the economic impact of the tariffs and recent uncertainty have yet to reflect in the official data.
In a recent strategy and research note, analysts at MUFG Bank said they were sellers of the Kiwi Dollar. "The NZD’s performance this month stands out. It has been the second-best performing G10 currency alongside the safe haven currencies of the CHF, EUR and JPY."
MUFG notes that the New Zealand Dollar's short-term strength outstrips that of currencies with similar dynamics, adding to the sense that the outperformance might be due a setback.
Currencies in the same bracket include the Australian Dollar and Norwegian Krone.
"With global growth slowing in response to the heightened policy uncertainty, trade disruption and tighter financial conditions, we do not expect the NZD’s recent outperformance to continue," say strategists at MUFG.