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FXstreet.com (Barcelona) - Mike Jones, Strategist at BNZ notes that NZD has become slightly more overvalued on a long-run basis.

NZD/USD, NZD/GBP and NZD/EUR are now all trading well over one standard deviation above their long run equilibriums, however, he notes that this does not necessarily imply any immediate downside pressure is on the pairs.

Jones highlights that all of these pairs have been overvalued in the past and it supports the idea that further upside for them could be limited, assuming the terms of trade holds around current levels. He notes that history suggests currency ´up´cycles tend to top-out at levels 20-30% above the long term equilibrium.

All of this colludes to support his view that NZD is likely to remain stubbornly strong over the coming 6-12 month, but without heading substantially higher. NZD/JPY is the only currency pair in the model which is estimated to be ´undervalued´ and fits nicely with his bullish NZD/JPY view. His forecasts are consistent with a further 5% lift in this cross through 2013.

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