(Bloomberg) -- Mounting concerns over a global trade war and surging risk-off sentiment have some investors concerned the New Zealand dollar will test its Covid-era low by year-end.

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The kiwi may weaken to 55 cents from its current level of around 56 cents by the end of June, according to Australia & New Zealand Banking Group Ltd., while Commonwealth Bank of Australia sees it hitting that level sometime this year. Forecasters at Standard Chartered Plc see it dropping below its March 2020 low of 54.70 cents by December.

President Donald Trump’s tariff blitz announced last week is likely to weigh on risk sensitive assets around the world, including the kiwi. The fear is that a trade war will curtail global growth, sparking a flight to haven assets. Further headwinds may lay ahead for New Zealand’s currency after the US placed accumulative 54% levies on China, the South Pacific nation’s main export market.

“We are bearish on the New Zealand dollar because we consider markets have not priced enough negative impacts on the global economy from the trade war,” said Carol Kong, Sydney-based currency strategist at Commonwealth Bank of Australia, who sees the currency weakening toward 55 cents.

The kiwi strengthened 1.5% versus the dollar in the first quarter, aided by higher milk powder prices and general weakness in the greenback. Leveraged funds remained net short on the currency, according to Commodity Futures Trading Commission data as of Tuesday.

“Risk appetite is the leading driver for the New Zealand dollar for now,” said Mahjabeen Zaman, head of foreign-exchange research at ANZ in Sydney, who also sees the kiwi testing 55 cents by June. “Dairy prices have been in an ascending trend but we note that the recent correlation of New Zealand dollar with dairy prices has also broken down.”

Traders will be closely monitoring the next Reserve Bank of New Zealand monetary policy decision on April 9, where the central bank is forecast to cut its benchmark interest rate for a fifth straight gathering. After three consecutive 50 basis-point moves, an expected quarter-point reduction may end up having little impact on the kiwi given swap markets are already fully pricing in that outcome.

“I don’t think there will be much impulse from the RBNZ meeting” on the kiwi, Zaman said. “A RBNZ at 3% terminal is already priced into markets.”

Story Continues

Next week’s main economic events:

Monday, April 7: Japan labor cash earnings Tuesday, April 8: Australia consumer and business confidence, Indonesia CPI, Taiwan CPI and PPI, Japan BOP current-account balance, South Korea BOP current account balance Wednesday, April 9: RBNZ rate decision, RBI rate decision, BOJ Governor Ueda speaks Thursday, April 10: Bangko Sentral ng Pilipinas rate decision, China CPI and PPI, RBA’s Bullock speaks, Taiwan trade balance Friday, April 11: Malaysia industrial production, New Zealand manufacturing PMI

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