New Zealand Dollar Will Extend Upsides in December

　　With the US Dollar Index falling by about 2.4% in November, the prices of the dollar against major currencies went down across the board. Among the non-US currencies against the US dollar, the Norwegian krone was crowned champion in November, increasing nearly 8%. Such a boom is attributed to rising oil prices. In terms of major currencies against the US dollar, however, the New Zealand dollar became the biggest winner in November, climbing nearly 6%. Its performance is even more striking if measured from the March low of 0.5468 to date, which is a sharp rise of 28.65%.

　　Among November's best performers, the Australian dollar came second with a 4.91% rise. The rest of the list is composed of the British pound, up 2.65%; the Canadian dollar, up 2.53%; the Chinese yuan, up 2.16%; the euro, up 1.89%; the Swiss franc, up 1.3%; and the Japanese yen, up 0.7%. This list shows that AUD and NZD, as currencies of commodity-exporting countries, have outpaced their peers due to the support from the upcoming vaccination and the dynamic expansion of global stock markets. The AUD's performance was inferior to the NZD's because Australia saw severe outbreaks and continued reduction of China's import dependence on its products.

　　In fact, NZD has been poised to rebound from the low of 0.6553 when New Zealand Prime Minister Jacinda Ardern was re-elected with an overwhelming victory on Oct. 17. At the time of writing, NZD/USD has reached a two-year high of 0.7047. The positive dynamic was attributed to Ardern's landslide victory, which shrugged off political uncertainties. But the most important reason is New Zealand's success in fighting against Covid-19. Led by Ardern, the country outperformed other peers in Europe and the US and even beat neighboring Australia. As of Nov. 30, the country only had a total of 2056 cases confirmed, of which 25 people have died from the virus. Its economy secured prudential stability without any significant lockdown. Although New Zealand's GDP in Q3 has not yet been announced, NZD is expected to embrace an uninterrupted rally as the financial market has braced for a sharp rebound. As a commodity currency, the New Zealand dollar is mostly sensitive to the prices of dairy products. Thus another boost for NZD is the international dairy prices that have been growing since September.

　　The New Zealand dollar had been receiving pressure since mid-August, when the Reserve Bank of New Zealand (RBNZ) announced the expansion of quantitative easing and signaled negative interest rates. But a dramatic shift appeared recently. New Zealand Finance Minister Grant Robertson said on Nov. 24 that the government was reviewing policies relating to the housing market and had sought advice from the central bank. With worries that New Zealand's loose monetary policy would push local property into bubble territory, Robertson advised the RBNZ Governor Adrian Orr to include stabilizing house prices as a factor for consideration in the remit when formulating monetary policy. The New Zealand dollar rocketed in the wake of such news. Everyone believed that New Zealand would not only ignore the negative interest rate, but also no longer increase the money supply., implying a halt to the RBNZ's quantitative easing.

　　Actually, effective vaccines are available for the world in early to mid-December since major pharmaceutical companies in the UK and the US have successively announced successful development. It will help resume economic activities and lift the global economy and stock markets, putting a premium on NZD and AUD. Therefore, from my point of view, the above positive factors will encourage the New Zealand dollar to triumph over other non-US currencies in December.