Risks include the weather, the global scene, low export prices and deteriorating structural metrics, but there are reasons for cautious optimism too
By Precious Silva (IBTimes)
Analysts remain mixed on how the Australian and New Zealand dollars will perform in 2016. Some expect the two currencies to perform well next year based on previous performance, but others believe they are poised to slide if policy makers will push for cuts on interest rates to spur growth.
The year 2015 was challenging for the New Zealand dollar especially with rising unemployment at 6.2 percent and dropping GDP at 2.4 percent, according to Exchange Rates. Additionally, the global commodity slump was also tough on the New Zealand dollar but this should change next year.
“Risks include the weather, the global scene, low export prices and deteriorating structural metrics, but there are reasons for cautious optimism too. Respectable growth should see the unemployment rate begin to fall again by late 2016, although questions remain over inflation dynamics,” ANZ wrote in its forecast.
Nonetheless, Bloomberg did say that while the Australian and New Zealand dollars were considered among the worst performers among the developed countries, they were able to get back up as the best performers.
“The recent out-performance in the Australian dollar in particular has been driven by some reassessment of the pace of easing from the RBA with pricing shifting from a near certain cut in 2015, to little chance of a cut for some time,” explained Daniel Been, a Sydney-based currency strategist at Australia & New Zealand Banking Group Ltd.
Analysts also sees the gains for the two currencies especially their trade in oil. Although China’s economic slowdown has also hurt markets across the globe, there are signs that it is already stabilising, according to the Sydney Morning Herald. There is an opportunity to get back up for markets and currencies next year, the analysts added.
“The risk premium has been applied on a very generalised, across-the-board basis,” explained Nick Chamie, a chief investment officer at Bank of Nova Scotia’s international wealth management unit.
“The risk premium has been applied on a very generalised, across-the-board basis. There’s scope for a tactical, short-term reversal of fortune at some point in 2016 for commodity currencies,” he added.
Originally published in IBTimes