AUD/NZD Exchange Rate Gradually Advances on Long Bonds
With risk aversion dominating the currency market, Australia’s government picked a good time to offer its longest ever bond, with risk-averse investors flocking to sovereign debt and pushing the benchmark yield to the lowest level in 16 months. An absence of data pertaining to New Zealand on Monday has seen the ‘Kiwi’ (NZD) fade against the ‘Aussie’ (AUD), although a decent result from Chinese imports and exports has seen both South Pacific currencies trending higher against their rivals.
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The Australian Dollar to New Zealand Dollar exchange rate is currently trending in the region of 1.1119.
The International Monetary Fund met in Washington last week and delivered a report which completely turned the financial market on its head. The report outlined the cool pace of global economic growth, ‘The recovery continues but it is weak and uneven,’ said the IMF’s economic counsellor, Olivier Blanchard.
What is concerning the IMF most is that the slowdown, particularly in advanced western countries, has the potential to be permanent. Blanchard argued that it was entirely possible that developed countries may never return to the peak levels achieved prior to the financial crisis.
Compounding waning trader risk sentiment have been growing concerns over the Ebola virus. Having established that it is a global issue that cannot be localised; risk-averse investors are steering clear of high-yielding currencies.
Both the Australian Dollar and the New Zealand Dollar declined significantly on Friday as a result of the issues addressed above. A huge declination in Australian Home Loans and Investment Lending added to the Australian Dollar downtrend.
With nothing in terms of New Zealand domestic data on Friday the ‘Kiwi’ slumped against nearly all of its major peers. Sunday’s economic data, however, only aided the ‘Kiwi’ downtrend with Food Prices and the yearly House Price Index ticking lower.
The Australian Dollar to New Zealand Dollar exchange rate has fallen to a low today of 1.1072.
Continued anxieties regarding the issues outlined by the IMF has caused the majority of the risk-correlated currencies to cool. However, both the ‘Aussie’ and the ‘Kiwi’ have advanced on Monday after Chinese data printed above expectations.
Year-on-year Chinese Exports grew beyond the market consensus of a rise from 9.4% to 12.0%, with the actual result advancing to 15.3%. Similarly the yearly Chinese Imports data outshone the median market forecast of an advance from -2.4% to -2.0%, with the actual data rocketing up to 15.3%.
The Australian Dollar has gained against the New Zealand Dollar on Monday principally as a result of timely long bond sales. The government plans on selling notes set to mature in 2037 which surpasses the tenor on a sale of 2035 inflation-linked securities from last year.
‘We have seen very strong interest in long-dated bonds globally since about mid-September,’ said Nick Bishop, who helps oversee the equivalent of about $10.7 billion as head of Australian fixed income at Aberdeen Asset Management Plc in Sydney. ‘It’s opportune, but it also reflects where the weight of money is going and there has been continued strong demand for long-dated product despite yields having fallen.’
Forecast for the Australian Dollar to New Zealand Dollar Exchange Rate
An Australian consumer confidence print due later on Monday evening has the potential to provoke ‘Aussie’ changes.
Tuesday’s Australian Business Confidence and Chinese Foreign Direct Investment publications are also very likely to spark movement for the Australian Dollar. The Chinese data may also have an effect on the New Zealand Dollar.
It is very likely that the New Zealand Dollar will continue to trend lower against the Australian Dollar on Tuesday as a solitary New Zealand data publication, Non Resident Bond Holdings, holds little weight in terms of provoking volatility.