Investing.com – The New Zealand dollar fell after the Reserve Bank of New Zealand cut interest rates earlier this week, and UBS expects the currency to fall further against the US dollar.
The RBNZ cut its official cash rate by 50 basis points to 4.75% at its meeting on Wednesday, a result consistent with market expectations.
The cut was triggered by a planned Monetary Policy Review, meaning there was no press conference or statement, analysts at UBS said in an Oct. 9 note.
“But we believe that the accompanying short press release increases the prospects of a new jumbo cut in November (50 basis points),” the Swiss bank said. “In addition, we expect a successive reduction in cash rates over the course of 2025 (25 basis points of easing per quarter), with the cash rate reaching 3.25% at the end of 2025 – a level broadly in line with the neutral assessment of the central bank.”
In contrast, the Federal Reserve has begun to push back against expectations of major rate cuts, and recent data confirms its stance. Importantly, participants in global interest rate markets have priced in the more extreme easing projections from just a few weeks ago.
“We expect the NZD to underperform most G10 currencies, even the US dollar, over the next six to 12 months,” UBS said. “We reiterate our forecast that rates will fall to 0.58 by year-end, although we see downside risks to this estimate as we now expect a 50 basis point cut in November (previously 25 basis points).”
At 05:20 ET (09:20 GMT), NZD/USD rose 0.2% to 0.6076, after falling more than 2% over the past week.
