Australian + New Zealand Dollar Exchange Rates Today: AUD/NZD Remains Stronger as RBNZ Comments Weigh upon NZ Currency

July 25, 2014 - Written by Ben Hughes

STORY LINK Australian + New Zealand Dollar Exchange Rates Today: AUD/NZD Remains Stronger as RBNZ Comments Weigh upon NZ Currency

The Australian Dollar to New Zealand Dollar eased slightly on Friday but was holding close to its best exchange rate level in nearly eight months. The AUD NZD currency stands at 1.10087.

The ‘Aussie’ strengthened broadly against all of its major peers on Thursday after data out of China, (Australia’s biggest trading partner) eased concerns that the world’s second largest economy was slowing down. Sentiment towards the global economy in general increased too after the release of positive purchasing manager index data out of the Euro and better-than-expected jobless claims data out of the USA.

Following the release of the data in China the Australian Dollar advanced to a three-week high against the US Dollar (USD) and pushed strongly back above the 94 cents level. The Chinese data compiled by HSBC/Markit showed that China’s Purchasing Managers Index advanced to 52.0 in July from June’s figure of 50.7. The figure beat forecasts for a reading of 51.0.

The report was the highest reading since January 2013, and was above the 50-point level that separates an increase in growth from a reduction in growth for the second consecutive month.

A sub-index measuring new orders, a gauge of demand at home and abroad, hit a 18-month high of 53.7, while the sub-index for output also rose to a 16-month high in June. The final Markit/HSBC manufacturing PMI for July is due on August 1.

As the session progressed the ‘Aussie’ lost some ground as data out of the USA supported the ‘Greenback’. According to the Washington based Labour Department the number of Americans filing for unemployment benefits dropped by 19,000 to 284,000. The figure was the lowest seen since 2006 and was below economist forecasts for a figure of 305,000.

“Claims are often volatile in the summer because of the timing of shutdowns at auto plants for retooling, but even so the downward trend in claims is evident and very positive for the labour market and the overall economy. The current level of claims is consistent with monthly job growth of above 20,000 and the July employment report should be another strong one,” said a chief economist at PNC Financial Services Group.

The data added to increasing speculation the US Federal Reserve will make an announcement on winding back its economic stimulus plan. As the US economy continues to perform well we can expect the Aussie to begin to weaken over the coming weeks and months.

NZ Dollar Falls to Six Week Low vs US Dollar

The New Zealand Dollar exchange rates fell further on Friday and dipped to a fresh six-week low against the US Dollar as the currency continued to be hammered by comments made by Reserve Bank of New Zealand Governor Graeme Wheeler.

The ‘Kiwi’ began its decline on Thursday when Mr Wheeler raised interest rates for a consecutive RBNZ meeting but said that any further rises are unlikely this year. He also said that the strength of the currency was unjustified and signalled that the moment has come for the Central Bank to intervene.

Mr Wheeler's comment that the level of the currency was "unjustified", "unsustainable" and had the potential for a "significant fall" signalled that he believed the bank's criteria had been met for intervention in the market to drive down the value of the kiwi, which has hovered just under post-float highs.

“The use of the word justified is a pretty powerful one. The RBNZ last used the word in an OCR statement in June 2007, after which it sold the ‘Kiwi’. Not saying that they will intervene, but the market is absolutely definitely on notice. The RBNZ choose their words carefully and we believe that the use of 'unjustified' is a clear signal that further New Zealand dollar strength would elicit a policy response. The quite clear intention for the RBNZ is to put the market on notice that they believe that their criteria have been satisfied,” said a forex trader at ANZ.

AUD NZD Update 28/07/2014

The Australian Dollar (AUD) fell broadly against most of its major peers over the weekend as positive data out of the US weighed on the currency.

Traders will now be looking ahead to the release of the latest data out of China and Europe for further direction. US GDP data out on Thursday will also be closely watched.

The Newe Zealand Dollar (NZD) meanwhile was also under pressure due to last week’s comments by the Reserve Bank of New Zealand and its announcement that no more interest rate rises will occur this year.

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