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AUD NZD Soars to 16-Month High on RBNZ Comments

Australian Dollar Exchange Rates
  • Australian Dollar New Zealand Dollar Soars to 1.1067 – New Zealand Dollar Australian Dollar Slides to 0.9030
  • Australian Q2 Private Capex Expands – ‘Aussie’ Dollar Bolstered
  • RBNZ Governor Wheeler Calls for Lower NZD to Bolster Inflation – NZD Obliges

The Australian Dollar continued its rally against the New Zealand Dollar today (AUD NZD) after the release of Australia’s private capex figures, further capitalising on the sell-off of the ‘Kiwi’ in the wake of RBNZ Governor Graeme Wheeler’s latest comments.

The Australian Bureau of Statistics reported that quarter-on-quarter private capital expenditure in Australia grew a seasonally adjusted 0.8% in Q2 2017, coming in at a total of A$28.275BN.

This exceeded the forecast, which remained at a measly 0.2%, following the 0.3% gain in Q1 (it should be noted, however, that the previous figure has since been revised to 0.9%).

Annually, the Australian capex dropped 3.0%, however.

In other good news for Australian data on Thursday, the Reserve Bank of Australia (RBA) announced that private sector credit within Australia jumped 0.5% month-on-month in July, in line with expectations but down from June’s 0.6%.

The market response to this news was predominantly positive, with the Australian Dollar continuing its rally against the ‘Kiwi’ from yesterday which was initially prompted by a statement from Reserve Bank of New Zealand (RBNZ) Governor Graeme Wheeler.

RBNZ Wheeler Calls for Lower ‘Kiwi’ (NZD) in Attempt to Propel Inflation

In an effort to bolster currently low levels of inflation in New Zealand the RBNZ Governor Graeme Wheeler announced on Wednesday that a lower New Zealand Dollar would help things along by bolstering the export sector. This triggered a selloff in the ‘Kiwi’ Dollar, prompting the latest AUD NZD surge.

Wheeler also took a cautious tone when discussing the housing market, asserting that there remains a risk that it could ‘take off’ again if the central bank decided to remove its loan-to-value approach to lending restrictions, stating; ‘Their removal would require a degree of confidence that financial stability risks won’t deteriorate again’.

Policymakers within New Zealand have discussed this problematic dichotomy for some time, acknowledging that rapid rises in the value of the ‘Kiwi’ Dollar often hurt exporter margins, preventing inflation from reaching target levels.

‘A lower New Zealand Dollar is needed to increase tradables inflation and help deliver more balanced growth’, Wheeler reiterated.

Assertions such as these have become more commonplace as of late for the ‘Kiwi’ Dollar, with the central bank decidedly ramping-up its rhetoric.

AUD NZD Forecast: Strong US Data Could Topple the ‘Aussie’ Dollar

Whilst that is it for data relating directly to the Australian Dollar and the New Zealand Dollar this week, tomorrow will be featuring a run of very significant US data prints, which could prove influential in moving AUD up or down.

Non-farm payrolls will be released for August, and are currently forecast to drop from 209k to 180k, these will be followed by the unemployment figure – the forecast is that it remained steady at 4.3%.

In the afternoon the US ISM figures, notably for manufacturing and employment, will be released, with manufacturing expected to crawl very slightly higher than it did in July.

As the performance of the Australian Dollar is intimately tied to that of its US counterpart, these figures could prove volatile for the AUD NZD exchange rate, knocking it down if they are positive, and up if they are negative.