NZD/USD can trade below equilibrium to attract foreign investments – BBH

NZD/USD retraced some of this week’s gains on USD strength, BBH’s FX analysts report.

Long-term fundamental equilibrium for NZD/USD is at 0.6700

“New Zealand’s annual current account deficit narrowed to -6.2% of GDP in Q4 from -6.5% in Q3. The current account deficit remains large by historical standards, suggesting NZD needs to keep trading at a deep discount to fundamental equilibrium to attract foreign investments and finance this deficit. We estimate long-term fundamental equilibrium for NZD/USD at around 0.6700.”