On Wednesday morning, the Australian dollar-to-New Zealand dollar exchange rate came within three pips of making a sixteen-month high after it finally breached 1.1 – the major technical resistance level in this rate. A rally slightly above 1.1 on March 16th (to 1.1019) was quickly rejected and preceded a three-month decline in AUD/NZD to levels around 1.037. At noon in Sydney, AUD/NZD was trading at 1.1001, with a session high of 1.1017.
One group advising continued buying of AUD/NZD is TD Securities. In a note to clients yesterday, the company expressed their pessimism on the New Zealand dollar and said that they liked short NZD positions against both the Australian dollar and the euro.
“An RBNZ meeting and a general election in September…will increase the risk premium on New Zealand dollars. The RBNZ is likely to remain cautious on the prospects of policy normalization and will continue to look for ways to keep a lid on kiwi strength. This comes against a likely stock of stale kiwi longs,” said an analyst at TD.
Pessimistic forecasts for New Zealand’s currency are commonplace at present. Last week, UOB said that a fall in NZD/USD to 0.69 is possible in the short-term – a fall of 5% from the current exchange rate of 0.727.
In South Korea, the focus will switch temporarily back to monetary policy and economics and away from missiles early on Thursday morning when the Bank of Korea will announce its latest decision on interest rates. The bank is expected to keep rates unchanged at 1.25%.
At the bank’s meeting, a cautious tone is likely to be adopted by Governor Lee Ju-yeol amid an obviously tense geopolitical situation. Any hawkish comments from the governor would likely warrant a move by markets to price in a quarter-point hike in Korea’s interest rate in October, according to Scotiabank, which would support the Korean won. The won recovered on Wednesday to 1121 against the dollar. Won weakness had driven USD/KRW as high as 1128.6 on Tuesday.
Finally, the US dollar should be commended for yesterday’s impressive fightback. It seems just hours ago that we wrote the following on BestExchangeRates:
“The tragic US dollar story continues. EUR/USD met no resistance at all on its way to a multi-year high above 1.20 on Tuesday and USD/CNY crashed through 6.6 for the first time in fourteen months.”
“The US Dollar Index’s fall below 92.0 was perhaps most concerning…and [a confirmed break] would suggest an even darker period ahead for the US currency.”
While the dollar could do little against a rapidly appreciating yuan, in all other cases it made back losses during the New York session (throughout the night in AsiaPac). As the dollar showed its metal, EUR/USD fell back below 1.20 by day’s end and the US Dollar Index rose back above 92.0.
Readers can change money at better exchange rates than those on offer at the banks and airport money changers by using BER’s online comparison calculators for travel cash and foreign currency transfers. Consider, for example, that a payment of EUR 50,000 with New Zealand dollars would cost only NZD 83,126 with today’s best value FX provider – a massive saving of NZD 3,600 on today’s Bureau de Change average.