Currency Newsflash Now: AUD/NZD Exchange Rate Remains in Tight Range after a Week of Rate Cuts and RBA Speculation

Modified: Monday, 15 June 2015 14:34 BST - Written by James Fuller

STORY LINK Currency Newsflash Now: AUD/NZD Exchange Rate Remains in Tight Range after a Week of Rate Cuts and RBA Speculation

Dovish RBA Minutes Could See AUD/NZD Exchange Rate Fall this Week

At the start of the week the Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate gained 0.6% in spite of New Zealand's Performance of Services Index showing improvement. However, we could see the AUD/NZD pairing reverse these gains depending on the content of the RBA's policy meeting minutes. If the minutes imply that the central bank is considering cutting borrowing costs for a third time this year, the 'Aussie' is likely to post widespread declines.

Earlier...

Australian Dollar to New Zealand Dollar (AUD/NZD) Exchange Rate Trending in Narrow Range, Rate Cut Speculation Drives Movement

The ‘Aussie’ remained in a tight range versus the ‘Kiwi’ after an extremely eventful week for both currencies. The main event for the New Zealand Dollar exchange rate this week came when the Reserve Bank of New Zealand cut interest rates by 25 basis points. At a time when both the UK and US are looking to hike borrowing costs, cuts in other nations can be devastating for the local currency. However, other areas of the global economy are implementing continuous sovereign bond buying schemes with no end in sight.

RBNZ representative John McDermott commented: ‘In part what we’re seeing lots of countries doing QE because they need to fix their own economies, but they’re spreading their problem to the rest of the world.’

Recent RBA Interest Rate Revision Keeps Australian Dollar Exchange Rate Lower Now

Australia has recently had to cut its own borrowing costs by 50 basis points to 2.0% after starting the year at 2.50%. The Australian Dollar exchange rate has been deemed overvalued for some time by the central bank and therefore a softer ‘Aussie’ would be more favourable.

Strategist Sam Tuck stated: ‘In the case of smaller developed economies, the level of the currency breeds through other monetary policy instruments. If the currency is high and it’s impeding the economy, you have to pull another lever in the economy to lower that impediment.’

RBNZ Triggers NZD Currency Drop-Off, Further New Zealand Dollar Exchange Rate Losses Ahead?

Overnight, the New Zealand Business Performance of Manufacturing Index emerged and registered a decline from a negatively revised 51.7 to 51.5 in May. Any figure above the 50.0 benchmark denotes growth whereas below signals contraction. The fall marked the third time in the latter five months that the index has remained between 51.0 and 51.9. However, despite Friday’s disappointing release, the sector has remained within expansion territory for the past 32 months.

Economist Craig Ebert stated: ‘Whatever is slowing New Zealand’s manufacturing production the sector has at least had some relief in the form of a weakening currency of late. NZD/USD has now dropped about 20% from a year ago – to be at its lowest level in five years. The weaker NZD might be something to support the PMI readings over the coming months.’

Australian Employment Data Gives AUD NZD Exchange Rate a Boost

Meanwhile, the ‘Aussie’ exchange rate was bolstered by favourable labour market ecostats on Thursday. The Australian Employment Change stat came in at 42K in May after economists had estimated a much smaller 15.0K rise. Additionally, the Australian Unemployment Rate figure dropped from a downwardly revised 6.1% to 6.0% in May.

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TAGS: Australian Dollar Forecasts Daily Currency Updates New Zea Forecasts