The Australian dollar has fallen on Monday morning, undermined by uncertainty generated by last weekend’s election result (or lack thereof).
While it has since recovered fractionally, the early morning selloff briefly saw the AUD/NZD fall to as low 1.0385, leaving the pair at the lowest level seen in 14 months.
Being less than 4% away, there are now more than a few murmurs doing the rounds that a move to parity could be on the cards, something that could see the pair test the lows of .9980 struck in April last year.
While he believes that uncertainty generated by the election could see the Aussie-Kiwi cross trade down to as low as 1.0355 in the ultra short-term, Imre Speizer, Westpac’s New Zealand-based senior market strategist, believes that the recent trend — something that has seen the pair fall over 8% since March — is more likely to reverse that continue in the period ahead.
“The RBA surprised by cutting in May, which suggests another cut to 1.5%, probably in August. The RBNZ is also expected to cut, to 2.0% in August. Relative central bank paths are thus neutral for the cross,” says Speizer.
“Multi-month, though, there is a case for higher, towards 1.1000, given it is currently well below fair value implied by interest rates, commodity prices and risk sentiment.”
As at 10am AEST, the AUD/NZD currently buys 1.0395.