Short term bias is remain total to the downside due to the strength on the dollar but in the medium term our bias is still firmly to the upside and these are the fundamental reasons:
Due to its high beta status, NZD’s performance over recent months has been strongly correlated with the market’s overall risk tone, with the currency weakening substantially as markets sold off and strengthening as the risk tone recovered and turned positive.
Recent global data has been encouraging, continuing to support NZD and the overall risk tone; although, the ongoing spread of the virus throughout the world and second waves in many countries still pose significant risks.
For a fundamental improvement in NZD’s outlook and bias, there will need to be an easing of concerns surrounding the spread of the coronavirus (which appears likely given the vaccine rollout).