Australian Dollar to New Zealand Dollar Forecast to Hold Losses on Iron Ore Price Slump

Modified: Sunday, 5 April 2015 17:03 BST - Written by Tim Boyer

STORY LINK Australian Dollar to New Zealand Dollar Forecast to Hold Losses on Iron Ore Price Slump

The Australian Dollar to New Zealand Dollar exchange rate softened dramatically after iron ore prices hit a fresh 10-year low.

The Australian Dollar was unlikely to make any significant gains during Friday’s European session given that iron ore is showing no signs of a speedy recovery.

A complete absence of domestic data pertaining to either Oceanic nation should see a continuation of the declination.

Although low dairy prices weighed on demand for the New Zealand Dollar, the ‘Kiwi’ is outperforming its South Pacific neighbour as a result of speculation that the Reserve Bank of Australia (RBA) will cut rates during April’s policy meeting.

Over the past week the Australian Dollar softened versus the majority of its most traded currency rivals in response to low iron ore prices. The base-metal dropped to a 10-year low on Thursday as a result of the erection of a new mine in Australia belonging to China. ‘Sino Iron is a 30 year plus project,’ Citic said in an e-mailed statement. ‘Citic is committed to its completion and operation in the long-term.’ The company declined to comment on the project’s costs. ‘A target of the Chinese government is to ensure that at least 50 percent of their future iron ore supply comes from a Chinese mine, though not necessarily a mine in China,’ said Caue Araujo, Sydney-based iron ore industry director at the research company AME Group. ‘That’s why China is in Peru, China is in Africa, China is in Australia.’

Thursday saw the New Zealand Dollar strengthen versus many of its major peers as a result of positive domestic data. ANZ Commodity Price showed 4.6% growth in March, advancing from the previous figure of 4.2%. The ‘Kiwi’ rallied against its Oceanic neighbour principally because speculation is rife that the RBA may cut rates again, which calls into question its future high-yielding potential. The Reserve Bank of New Zealand (RBNZ) hasn’t shown any signs of loosening monetary policy.

UPDATES

Given the complete absence of domestic data pertaining to either nation, commodity prices is likely to dictate movement for the South Pacific currencies. That being said, China's HSBC Services PMI will be of interest.


Developments in Europe will be of interest to those invested in the Oceanic currencies. Should Greece’s latest reform proposal get rejected, dampened market sentiment is likely to see both the ‘Aussie’ and the ‘Kiwi’ soften.

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TAGS: Australian Dollar Forecasts