May 22, 2015 - Written by Ben Hughes
STORY LINK AUD/NZD Exchange Rate Falls as Central Bank Speculation and Iron Ore Woes Weigh
Australian Dollar Exchange Rate falls against NZ Dollar (AUD/NZD) as Central Bank Speculation and Iron Ore Woes Weigh
The Australian Dollar softened against the New Zealand Dollar in a quiet end to the week for Australian domestic data. However, the New Zealand Dollar is pegged to be heading for a 1.2% weekly decline as central bank speculation continues to plague the market. The prospect of a Reserve Bank of New Zealand rate cut has been weighing on the ‘Kiwi’ exchange rate for some time as a slowdown in the Oceanic region takes place. Next month will see the RBNZ meet to discuss monetary policy and investors are pricing in a 45% possibility that a 25 basis point rate cut will take place.
Trader Martin Rudings commented: ‘Expectations around a rate cut in New Zealand in June/July has slipped away, and the market seems to be split more 50/50 on a June rate cut. Today there was a noticeable buyer in the market and the sales looked like they were out of New Zealand.’
However, the ‘Kiwi’ exchange rate is expected to be rising against the ‘Aussie’ as the Chinese government funds Brazilian Infrastructure projects and gives it a new iron ore supplier. As iron ore is Australia’s largest commodity, any developments in demand or price can severely weigh on the ‘Aussie’ commodity currency. There’s already an iron-ore glut in the market and therefore additional expansion could see the price of raw steel remain lower in the near future.
Roy Hill chief Barry Fitzgerald commented: ‘It reminds me and it should remind all of us that we are in the mining industry in a competitive international business, and what we do needs to reflect the pressures and the actions of our competitors.’
Additionally, the expansion project which is around 80% complete is expected to see a 63% blended product on the market.
Fitzgerald continued: ‘That particular blend is in direct competition for both us and the two major producers in the Pilbara. That again reminds us that we are in a competitive environment, and that our market share and position in the world will be coveted by other companies, and as such we need to make sure that we are productive and efficient.’
Meanwhile, New Zealand’s Consumer Confidence Index slipped in May, from 128.8 to 123.9. However the ecostat did manage to remain buoyant above the 100.0 threshold which denotes optimism. The gauge has remained above 100.0 since 2009 when the global financial crisis was in full swing.
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It’s likely that both Trans Tasman majors will feel the impact of influential US data later in Friday’s session.
As the rest of the day is quiet by way of Oceanic ecostats, the commodity currencies are likely to experience movement from global developments.
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TAGS: Australian Dollar Forecasts Currency Predictions New Zeala Forecasts