Aus Dollar to NZ Dollar Exchange Rate (AUD/NZD) Trades Higher on a Dovish RBNZ

Modified: Tuesday, 4 November 2014 11:17 BST - Written by Toni Johnson

STORY LINK Aus Dollar to NZ Dollar Exchange Rate (AUD/NZD) Trades Higher on a Dovish RBNZ

With the recent Reserve Bank of New Zealand policy statement still having an impact, the Australian Dollar to New Zealand Dollar exchange rate (AUD/NZD) was set to end the European forex session trading up on the week’s opening levels.

The AUD/NZD hit lows of 1.11 NZ cents and highs of 1.13 NZ cents over the five days as investors responded to a number of influential economic developments.

While both South Pacific currencies benefited from an improvement in risk sentiment, the Australian Dollar maintained the upper hand thanks to the RBNZ’s dovishness.

As forecast by economists, the RBNZ opted to leave interest rates on hold at its latest gathering. The Official Cash Rate was left at 3.5% and the central bank indicated that no further rate hikes would be occurring in the foreseeable future.

In the statement issued by RBNZ Governor Graeme Wheeler it was said; ‘The global economy is growing at a moderate rate although recent data suggests some softening in the major economies, apart from the United States. [...] Lower commodity prices and increased global financial market volatility have taken some pressure off the New Zealand dollar. However, its current level remains unjustified and unsustainable and continues to constrain growth in the tradables sector. We expect a further significant depreciation. [...] CPI inflation is currently at a low level despite above-trend growth. However, inflation is expected to increase as the expansion continues. A period of assessment remains appropriate before considering further policy adjustment.’

The Australian Dollar and New Zealand Dollar Fall vs US Dollar

Both the Australian Dollar (AUD) and New Zealand Dollar (NZD) declined against the US Dollar (USD) this week after the Federal Open Market Committee brought quantitative easing to an end and the US published above-forecast third quarter growth data.

However, a risk-on environment ensured that the ‘Aussie’ and 'Kiwi' were able to recover some declines. According to one locally-based currency strategist; ‘The US Dollar ran out of puff in its post-FOMC rally. This is a strange result, especially in the context of data released last night. Certainly, it helps to vindicate the optimism that the FOMC voices in [it’s] policy decision.’


On Friday the AUD/NZD pairing slipped from a high of 1.1273 to trade in the region of 1.1230 in spite of as forecast Australian data.

Australia’s Private Sector Credit came in at 0.5% in September month-on-month, up on the forecast of 0.4%.

On the year, the figure climbed from 5.2% to 5.4%. Similarly, Australia’s Producer Price Index for the third quarter advanced from -0.1% to 0.2%, quarter-on-quarter.

The index was, however, down from 2.3% to 1.2% on the year.

While Friday’s US data was thought to inspire additional movement in the AUD/NZD, fluctuations in the pairing are more likely to occur over the weekend after China publishes its manufacturing PMI.

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TAGS: Australian Dollar Forecasts New Zealand Dollar Forecasts