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UBS Reaffirms Positive Stance on New Zealand Dollar After RBNZ Rate Hike
UBS continues to favor the New Zealand dollar (NZD) in its global foreign exchange strategy, citing a supportive monetary policy backdrop following a recent interest rate hike by the nation's central bank, according to a research note from the investment bank.
RBNZ Delivers Expected Rate Hike
The Reserve Bank of New Zealand (RBNZ) raised its official cash rate by 25 basis points to 2.50%, a move that was widely anticipated by market consensus. The decision marked the central bank's first interest rate increase in three years.
In its accompanying statement, the RBNZ signaled that further policy tightening will likely be necessary. The bank noted that current settings remain accommodative and that more hikes would be required to guide inflation back toward the 2% midpoint of its target range.
UBS Investment Thesis
AdFollowing the RBNZ's decision, UBS reiterated its attractive view on the kiwi dollar. The bank recommends that investors seeking to diversify their holdings away from the U.S. dollar should consider holding the New Zealand dollar on an unhedged basis.
Furthermore, UBS outlined a specific trade recommendation, favoring a short position on the Australian dollar/New Zealand dollar (AUD/NZD) currency pair. The bank's targets for the trade are:
- Position: Short AUD/NZD
- Target: 1.18
- Stop-loss: 1.24
UBS analysts noted they expect the RBNZ to deliver its next rate hike in September, reinforcing the hawkish policy stance that supports the currency.