NZD/USD risks as New Zealand reopens

New Zealand has put in place measures to cushion the economy. For example, the government has unveiled a fiscal stimulus worth about $62 billion or 20% of GDP. Most of the funds went to help businesses pay their employee wages, tax cuts, and income support.

At the same time, the central bank has brought interest rates to historic lows and initiated a $37 billion quantitative easing program. The bank has also talked about the possibility of negative interest rates and boosting its asset purchase program.

Still, New Zealand faces several key risks. First, there is a risk of a second wave of coronavirus infections now that the world does not have a vaccine or therapy. In recent days, we have seen spikes of cases in countries like South Korea and Hong Kong.

Second, even with the reopening, some industries will continue to see low or no growth. For example, the tourism industry that employs thousands of New Zealanders will take months or years to recover. The industry is also the biggest source of foreign exchange. The GDP is still expected to drop by 23% in the second quarter.