The RBNZ becomes vocal about the strength of the Kiwi
As one of the economies that is deemed to be most likely to raise ratesover the next few quarters, New Zealand has managed to attract interestfrom those investors that are motivated by positive carry. This has led to abrief test of the 1.0500 level over recent sessions, versus the AustralianDollar, a nation that currently shares the same base rate as New Zealand.These movements have motivated the finance minister Bill English tocomment on the strength of this key cross, suggesting that he would liketo see the Kiwi weaker against its Australian counterpart. He argues thatthe Australian economy is stronger relative to that in New Zealand than isindicated by the current exchange rate (near 1.0800). We believe that oneof the following two scenarios are more likely than the market currentlyexpects. They are:1. New Zealand may not raise rates as aggressively as is currently pricedinto the market.2. Australia may stabilise sooner than expected, bringing forward astabilisation/rise in interest rates there.
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