Australian Dollar Climbs vs New Zealand Dollar (AUD/NZD) Exchange Rate Despite Disappointing Domestic Data

January 11, 2015 - Written by James Fuller

STORY LINK Australian Dollar Climbs vs New Zealand Dollar (AUD/NZD) Exchange Rate Despite Disappointing Domestic Data

The Australian Dollar recorded gains against the New Zealand Dollar despite an upbeat rise in New Zealand Building Permits. Investor sentiment in the Oceanic currencies enjoyed a boost as expectations for US Federal Reserve Rate Hikes declined, while expectations for bond buying from the European Central Bank increased. Economist Daisuke Karakama stated: ‘We’re seeing some Fed officials starting to hint they may slow the pace of rate increases, so even if the labour report shows strong numbers, it won’t be a reason for the Dollar to gain too much. There aren’t many reasons for the Dollar to trend lower either, Even if the labour report turns out to be bad, we shouldn’t expect the Dollar to fall below 118 Yen.’ As US Dollar strength decreases investors turn to higher yielding currencies such as the ‘Aussie’ and the ‘Kiwi’.

Data published overnight showed that New Zealand Building Permits rose by 10% in November while October’s reading was positively revised to 9.8%. The building sector has been strengthening since an earthquake damaged properties in Christchurch and Auckland suffered an accommodation shortage. However, the housing market is heating up, meaning the Reserve Bank of New Zealand could maintain the current benchmark interest rate despite a forecast fall in inflation. Research expert Stephen Toplis stated: ‘House price inflation is still too high and turnover data suggest it is about to take another leg up. The last thing the economy needs now is more stimulus for the housing market.’

Meanwhile, Australian figures were a little less positive when the AiG Performance of Construction Index dipped from 45.4 to 44.4. Economist Julie Toth stated: ‘The lack of growth in new orders for construction in the final two months of 2014 is of particular concern to the outlook, especially in the commercial and engineering subsectors. In housing, new orders look to have stabilised after growing strongly for much of 2014. This stability bodes well for the pipeline of work that will commence in the all important new housing sector in 2015.’

To add insult to injury, Australian Retail Sales were also disappointing, with November only recording a 0.1% sales increase. October had seen 0.4% growth and economists had expected a 0.2% recording in November. In addition, Australia and New Zealand’s largest trading partner, China, saw a further decline in its Producer Price Index, which slumped from -2.7% to -3.3% in December on the year.

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