fxmatters

Any post-MPS NZD selling was brief and more than offset by subsequent buying. In fact the NZD was one of the strongest currencies in the world last week (slightly behind the Russian ruble), posting the ninth consecutive weekly NZD/USD gain. It is apparent that the RBNZ are reluctant to respond to the stronger NZD, conceding they believe there is little they can do to influence the NZD – the result was the NZD/AUD rising 1.5% over the rest of the week.

However, the NZD/AUD remains within the upper half of an approximate 77-83c range. It is likely to remain within this range, including moving below 80c once market participants return to focusing on the probable gap between any RBA and RBNZ tightening (i.e. the RBA moving much sooner than the RBNZ).

Meanwhile the NZD/USD strength rests on a weak USD and strong share markets. There are global forces that could reverse both or each of these trends quickly. A bias towards selling the NZD at these levels appears appropriate but that is not to say the NZD/USD could not rise further in the short-term.