Both the Australian and New Zealand dollars made all time highs against the USD in 2011. The Kiwi in March at 0.8841 and the Aussie a little later in April at 1.1080. That gave us an all time high also on the AUDNZD exchange during this period of 1.3791.
But this morning the AUDNZD was sitting at 1.0550, down more than 24%.
The key thing is that at 0.8817 against the US dollar, the Aussie is off more than 20% from the highs, while the Kiwi is sitting at 0.8350, down less than 5c or around 6% lower than its all time high.
It kind of feels like the Wallabies are getting touched up by the All Blacks again.
But quite simply when you combine the unwinding of the safe haven trade, which put so many billions of dollars into Australian markets during the dark days of the GFC, add in the perceived end to the mining boom and the intervention of the RBA Governor Stevens and you end up with Aussie dollar selling and deterioration in sentiment in a way that has not been seen in New Zealand.
The question of how low it can go? Can the Aussie hit parity?
To put some context around the question it is worth noting that the all-time low during the Asian Crisis was around 1.0280 while the low this decade was 1.0420 in 2005.
John KickLighter, Chief Strategist for DailyFX.com, shared the following chart over Twitter.
The chart represents the deviation of the Aussie Kiwi of more than 1000 points from the 12-month average, which tends to lead to a sort of mean reverting behaviour of the cross. Kicklighter told Business Insider via Twitter that, “I do like it to the long side. But it is a big-picture trade, so my timing and stops will match the time frame.”
So it might be a little early to break out the champagne for a parity party just yet, but the risks are rising.
Disclaimer: Greg McKenna is an active currency trader and reckons the Wallabies are far superior to the All Blacks. As a consequence he is long AUDNZD.