The Only Two Currencies Worse Than The Dollar This Year Have One Thing In Common

new zealand

Photo: phillipc via flickr

Apparently, for the dollar to outperform against another major currency, there needs to be a horrible earthquake involved.From Citi’s Todd Elmer:

Although NZD has rallied about 5.5% from its recent post-Japanese earthquake lows, it is still down slightly this year vs. the USD. Indeed, it ranks alongside JPY as one of only two major currencies to weaken against the dollar. It has well underperformed AUD with AUDNZD trading to its highest levels since the early 90s.

 

We believe this underperformance is increasingly stretched, which suggests risk-return in long NZD positions is attractive. We see further scope for gains in NZDUSD and an implicit top in AUDNZD, but tactically we believe long positions in NZDJPY are attractive given the slight pullback following recent gains. Specifically, we favour buying European digitals on NZDJPY.

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