Here's why the Aussie dollar fought back against parity with New Zealand

Go get ’em boys. Photo: Getty

I don’t usually cheer forex rates – they’re just the market’s view of the relative merits of two countries economic prospects.
It’s not the footy!

That’s unless it’s the AUD-NZD – the Aussie versus Kiwi dollar – a Bledisloe of currency in which I’m cheering on the Aussie to stay above parity.

Lately, as iron ore crashed and everyone’s expected further cuts from the RBA, the Aussie has been losing ground against its cross-Tasman rival, trading down to 1.0016 earlier this month and a low of 1.0036 this week.

NZDUSD Hourly Chart (Go Markets, MT4)

But that changed overnight with the Aussie outperforming the Kiwi against the US dollar. That lifted AUDNZD off the mat and this morning RBNZ assistant governor Dr John McDermott said the RBNZ wasn’t looking to increase interest rates anytime soon.

“Before considering any tightening in monetary policy we would need to be confident that increased capacity utilisation and labour market tightness was generating, or about to generate, a substantial increase in inflation,” McDermott said this morning.

That knocked the Kiwi lower, but in a clear signal that the AUDNZD near parity is too low, and the Kiwi dollar is too strong, McDermott echoed comments from RBA governor Glenn Stevens and his colleagues saying that “The fact that the exchange rate has appreciated while our key export prices, such as dairy, have been falling, is unwelcome.”

AUDNZD Daily (Go Markets, MT4)

So the AUDNZD is rocketing higher and sits at 1.0190 this morning. Up 0.87% and climbing away from the danger zone. At least for the moment.

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