NZD/USD remains undervalued – Westpac

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 7, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) – Imre Speizer, Senior Markets Strategist at Westpac, suggests that according to their short term fair value model for NZD/USD shows it remains undervalued, this week by 3.6 cents (vs 6 cents last week).

    Key Quotes

    “The fair value range is 0.7040-0.7185, based on the NZ-US interest rate spread, commodity prices and various alternative measures of risk sentiment.

    The pair has been undervalued since 25 May, by between 1 and 8 cents. One explanation is the US dollar’s overvaluation, markets pricing more Fed tightening into the US dollar than is implied by US interest rates. Evidence for this is the AUD/USD’s undervaluation and the DXY’s overvaluation using similar models.

    NZ dairy prices are poised to rise slightly further at the next auction on 16 Dec. WMP futures contracts are predicting a 7% rise at this juncture, with the more distant contracts also implying a medium term bottom has been formed. Markets are trying to find an equilibrium ahead of a looming El Nino induced drought.”
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