Forex Flash: Market fails to take pre-emptive plunge ahead of RBNZ – UBS

Although the recent news flow continues to point to the need for somewhat tighter conditions in New Zealand, it appears that the market is unwilling to take the plunge on pre-emptive RBNZ moves. Indeed, corporates and hedge funds have been adding to shorts in recent weeks. Clearly, the need to reconcile tighter conditions with 'overvalued' currency has resulted in a hesitant RBNZ, and deterring potential longs in the meantime.

However, “if the RBNZ does start changing its rhetoric again and focus solely on the need for monetary adjustment irrespective of the NZD, we doubt current shorts will be able to hold for long.” adds Research Analyst Gareth Berry at UBS.