New Zealand’s Dollar Is on Brink of Longest-Ever Losing Streak

The New Zealand dollar looks poised to suffer a record losing streak.

(Bloomberg) — The New Zealand dollar looks poised to suffer a record losing streak.

The currency fell for 10 consecutive days through Monday, a stretch of declines not seen since March 2020. An 11-day drop would be the most prolonged in its history, according to trading data as far back as the 1970s.

The nation’s currency has been pressured by a central bank decision to hold interest rates unchanged for a second straight meeting even as policymakers elsewhere weigh further hikes. Traders are also worried about the impact of an economic slowdown in China, New Zealand’s biggest trading partner. The New Zealand dollar has underperformed all its Group-of-10 peers against the US dollar since the start of the month, sliding almost 5%. 

The currency’s rate appeal has faded versus peers with “more hawkish central banks, like the Australian dollar, US dollar and most European currencies,” said Valentin Marinov head of G-10 FX research and strategy at Credit Agricole CIB. He forecasts the currency will remain weak, trading around $0.59 over the next three to six months. 

The Reserve Bank of New Zealand was at the forefront of the global post-pandemic tightening campaign, raising rates by 525 basis points since October 2021. But most economists think interest rates have now peaked for this cycle and expect the next move will be a cut.

Meanwhile, China’s economic deceleration is also weighing on the New Zealand dollar, as it has contributed to a widening trade deficit. New Zealand’s exports to the Asian nation dropped 18% in July and RBNZ Governor Adrian Orr has warned that China’s slowdown poses a risk to growth.

Still, some analysts see the kiwi nearing the end of its precipitous slide. Analysts surveyed by Bloomberg see the currency slightly rebounding to $0.62 by the end of the year. 

And Nick Rees, a currency strategist at Monex Europe Ltd, sees the prospect of Chinese economic stimulus and the looming end to US tightening putting a floor under the New Zealand dollar. He forecasts the currency will reach $0.62 by the end of October and $0.65 by January.

“The New Zealand dollar doesn’t have legs to plumb much lower in the coming months,” Rees said.

–With assistance from Vassilis Karamanis.

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