Rabobank makes outlandish prediction that NZD/USD is set for big drop

Dutch financial giant Rabobank, itself an institution with plenty of expertise as a Tier 1 FX interbank dealer, has made an outlandish prediction regarding the direction of the New Zealand Dollar when traded against the US Dollar.

Analysts within the financial institution stated yesterday that they expect the US Dollar to continue to garner interest as a result of safe haven demand, regardless of some degree of speculation that the US Federal Reserve’s policy of fiscal tightening over the next few months has been underestimated.

Rabobank’s analysis showed that there is an expectation that the NZD/USD pair could reach lows around the 0.61 mark, which is of course speculatory but still an interesting observation.

One of the most important effects on the New Zealand economy that has taken place in recent times is the draconian lockdowns implemented by prime minister Jacinda Adern, who is regarded by many to have socialist political views.

Her administration became very unpopular during the period between March 2020 and the end of last year, to the extent that a net 10,674 people left the country over the 12 months to May, causing a labor crunch which has impacted the economy.

When the country re-opened after a long period of all-encompassing lockdowns which crippled the economy, there was not a sudden return to economic norm that occurred in some other nations, largely because of such a high number of New Zealand’s residents having left the country as soon as the airports reopened instead of staying behind to rebuild the stalled economy.

This considerable exodus occurred at the same time as New Zealand struggled to fill jobs, and at a time during which the number of foreign workers had been still very low, and during which the economy had been close to maximum employment.

Now, with no lockdowns in place, businesses are struggling to find employees with the right skills, which further impacts New Zealand’s ability to remain a competitive economy, whereas other regions in which major currencies are the sovereign tender, there are less issues of this type, particularly in Europe and the United States.

Canada and Australia have experienced emigration increases, but Northern Europe and the United States are operating at full capacity with no mass exodus of skilled workers, and have benefited from the relocation of those from New Zealand with good skills.

This is one major factor that has contributed to the New Zealand Dollar’s stunted progress, and it could be in for a long recovery.