Jason Wong, Currency Strategist at BNZ, notes that after a sharp fall earlier in the year, the NZD has settled into a trading range. Key Quotes “The recent lift in risk appetite and stronger Yuan – both of which have supported the NZD – could well prove to be temporary factors. The balance of risks has been moving towards further NZD weakness, but later in the year, rather than earlier. We look for NZ-global rate spreads to narrow further, soft commodity pricing to continue and we suspect negative sentiment towards China will return. All these factors would be NZD-negative. Dovish actions from other global central banks such as the BoJ and ECB have served to drive global interest rates lower. However, the overall impact on the NZD has been mitigated to the extent that the RBNZ has joined the party, with a surprise easing this month. Further RBNZ easing looks likely over coming months. Indeed, if the RBNZ is serious about meeting its inflation target, then it will need to take the cash rate below 2%. This should keep downward pressure on NZ-global rate spreads, and is NZD-negative.” For more information, read our latest forex news.