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NZ dollar hits 33-month high

The New Zealand dollar continues to rally this week. Currently, NZD/USD is trading at 0.7286, up 0.48% on the day. The pair has gained 1.4% this week and has touched a high of 0.7315 today, its highest level since April 2018.

More pain for the US dollar in 2021?

The US dollar has bid goodbye to a miserable year of 2020, but the currency could well find itself in retreat in early 2o21. The incoming Biden administration has pledged to implement further stimulus, and the Democrats are on the verge of controlling all three branches of the federal government if they can hang on to their narrow leads in the Georgia runoff election. This would allow the Democrats a free hand at pursuing policies such as raising corporate taxes and undoing pro-business legislation enacted under President Trump. These moves would likely be bearish for the US dollar, especially if more stimulus is on the way which will flood the economy with dollars. An increase in negative real yields in the US will exacerbate the woes of the greenback, and we can expect the rotation into pro-cyclical currencies like the New Zealand dollar, which has soared against the US dollar, to continue.

With Covid expected to diminish this year or even disappear completely due to the rollout of Covid vaccines, New Zealand’s export-reliant economy should bounce back in 2021. Just a few months ago, the New Zealand central bank was toying with adopting negative interest rates due to the severe economic downturn, but with the global economy slowly finding its footing, it’s a safe bet that these plans have been shelved for the foreseeable future. This removes a significant downside risk for the New Zealand dollar. Despite Covid-19, the New Zealand dollar has made impressive gains against the US dollar, and the short-term future for the currency is looking as bright as a beautiful New Zealand sunrise.

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NZD/USD Technical

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher [4]

Market Analyst at OANDA [5]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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