AUD to NZD Exchange Rate Trends Flatly Near Weekly Lows Ahead of RBNZ Meeting

March 22, 2017 - Written by Ben Hughes

STORY LINK AUD to NZD Exchange Rate Trends Flatly Near Weekly Lows Ahead of RBNZ Meeting

The Australian Dollar to New Zealand Dollar exchange rate has tumbled since markets opened this week amid a lack of supportive Australian data and more optimistic New Zealand Dollar trade, ahead of this week’s Reserve Bank of New Zealand (RBNZ) meeting.

AUD/NZD opened this week at the level of 1.0969 and has since slipped, hitting a low of 1.0876 on Wednesday. This was AUD/NZD’s lowest level in almost two weeks.

AUD Lacks Support This Week

After last week’s underwhelming Australian confidence stats and poor domestic job data, this week’s quiet economic calendar has given AUD traders nothing fresh to get excited about.

Following a cautious minutes report from the Reserve Bank of Australia (RBA) on Tuesday, markets are now even more put off the Australian Dollar and favour the New Zealand Dollar instead this week.

The RBA left no indication on whether or not it would shift its stance on Australian monetary policy any time soon and also left its first warning in a while on the Australian housing market, indicating it was still at risk of bubbling.

Prices of iron ore, Australia’s most lucrative commodity, have also weakened this week which has weighed on AUD demand. The commodity has seen its worst drops of 2017 as Chinese futures plunge.

NZD Benefits from Dairy Prices and RBNZ Hopes

Weakness in the Australian Dollar has given the New Zealand Dollar space to advance this week. The ‘Kiwi’ has benefitted from this week’s commodity news, as well as investor anticipation for this week’s Reserve Bank of New Zealand (RBNZ) meeting.

Tuesday’s Global Dairy Trade (GDT) auction ended with prices of dairy (New Zealand’s most lucrative commodity) rising 1.7%.

While a small increase, it bolstered hopes that the commodity was not on track for an exte3nded period of losses following drops over the last month. It was the biggest increase in dairy prices in 2017 thus far.

While investors don’t have high expectations from the RBNZ this week, solid New Zealand data in recent months has markets optimistic that the bank will at least avoid further rate cuts.

AUD/NZD Forecast: Reserve Bank of New Zealand (RBNZ) Meeting in Focus

The next week looks to be a quiet one for Australia’s economic calendar. As a result, AUD/NZD is likely to be influenced by movement in the New Zealand Dollar unless prices of iron ore increase and bolster the commodity-correlated ‘Aussie’s defences.

The Reserve Bank of New Zealand (RBNZ) will hold its March monetary policy meeting during Thursday’s Asian session, which will certainly influence ‘Kiwi’ movement if is surprises traders.

Any indication that the RBNZ could tighten NZ monetary policy in the foreseeable future would cause investors to go all in in the New Zealand Dollar and drag AUD/NZD down to new lows.

On the other hand, if the bank takes a more cautious tone than expected it could increase bets that the RBNZ could cut interest rates again.

If the RBNZ just takes a neutral tone as it has in recent months, AUD/NZD may not see much shift in direction and could end the week below its opening levels, near two-week-lows.

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TAGS: Australian Dollar Forecasts New Zealand Dollar Forecasts