FxWirePro medium term outlook: Kiwi likely to test 0.8

As economic and political uncertainties cloud the globe, we strongly expect commodity currencies will be seen as safe havens with their higher yield offerings. In addition to that, we feel that there has been a major shift in the market this year. Commodities are certainly the best performers both industrial and agricultural and precious as well.

New Zealand which is a major benefactor of Agricultural commodities, especially milk is likely to benefit from the current shift in commodities over time. In addition to that, New Zealand’s exposure to agriculture puts it in a different league compared to many other commodities producers, especially of energy and metals.

In addition to that, we don’t expect the dollar to have much inherent strength as the interest rate expectations that have fuelled the dollar’s rise has weakened significantly. The dollar may rise against the Euro and the sterling but that would be due to political uncertainties in the region.

With such outlook, we feel that the kiwi dollar has formed a strong base near 0.7 area and likely to rise further towards 0.8 area from the current rate of 0.72. Any deeper correction in kiwi should be seen as an opportunity to go long in the pair.