NZD/JPY Outlook:
The outlook is likely to increase as the rate is significantly above its 90-day average and near recent highs, boosted by commodity strength and interest rate differentials.
Key drivers:
• Rate gap: The Reserve Bank of New Zealand may cut interest rates, while the Bank of Japan has recently raised rates, supporting NZD against JPY.
• Risk/commodities: Oil prices are rising, which tends to strengthen commodity currencies like the NZD, as New Zealand relies on exports of goods tied to these prices.
• One macro factor: Concerns over Japan's fiscal sustainability after economic measures proposed ahead of elections have created additional volatility for the JPY.
Range:
The NZD/JPY is likely to drift within its recent range, influenced by global market conditions and domestic economic policies.
What could change it:
• Upside risk: Strong commodity price increases could further enhance the NZD.
• Downside risk: Unexpectedly weak economic data from New Zealand could lead to NZD declines.
