NZD: Looking for a bottom – BBH

Analysts at BBH have been looking for a bottom in the New Zealand dollar, suspecting the market was overreacting to the new Labour-New Zealand First government.  

Key Quotes

“We expect the pro-growth orientation will be rewarded over time.  In recent days, the downside momentum faded as the Kiwi approached the lows for the year, set in May near $0.6800.  However, the bias was still to sell into rallies.  Until today, when the stronger than expected Q3 employment figures spurred a powerful short squeeze.”  

“The Kiwi is up more than 1% to trade at its best levels in a week near $0.6930.  The bears may try to make a stand, but we anticipate an upside correction will continue and look for a move toward $0.7000-$0.7050, even if a modest pullback is seen first.  At the same time, New Zealand shares were hit by profit-taking after a strong run, as the Kiwi fell.  The 1.15% loss was the largest since March.”