The Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate has fluctuated heavily since markets opened this week as risk sentiment has been throttled by various global factors and Australia faces domestic concerns.
Despite attempts at a bullish run on Monday and Tuesday after last week’s pummelling, the Australian Dollar began to fall on Tuesday night, leaving the AUD/NZD exchange rate once again trading nearer to the week’s opening levels of 1.0784.
At the time of writing, AUD/NZD was down around -0.2% in London’s Wednesday session, and trended in the region of 1.0812. This comes after the pair reached a new weekly high of 1.0918 on Tuesday.
Wednesday morning’s Australian datasets may have helped to slow the Australian Dollar’s fall as it still trends higher this week. Westpac’s latest consumer confidence index improved from 95.1 to 103.2 – which, according to Business Insider Australia, is its biggest increase in 6 years.
Home loans data was also better-than-expected, with a contraction of only -0.9% rather than the estimated -1.5%. Unfortunately, investment lending slowed from 3.1% to 1.5%.
The primary reason for Tuesday night’s ‘Aussie’ plummet is likely a slump in iron ore prices, as the commodity-correlated Australian Dollar often reacts to shifts in Australia’s most lucrative commodity.
With the volatile New Zealand Dollar being very sensitive to global risk movements, the risky commodity currency’s current strength against the ‘Aussie’ and some other major rivals is due to new housing news – or lack thereof.
According to the Business Times, the Reserve Bank of New Zealand (RBNZ) was widely expected to link its housing concerns with dovish action when it released its latest financial stability report.
In its six-monthly financial stability report, the RBNZ said it was increasingly concerned about the country’s overheated housing market, but it stopped short of taking measures to tighten lending, forcing Kiwi bears to the exit.
Many relieved investors bought the ‘Kiwi’ as a result, seeing the volatile currency as preferable to the Australian Dollar, which suffered directly from iron ore commodity news.
Thursday could see the Australian Dollar once again attempt to make a recovery if the morning’s Australian consumer inflation expectation report releases as optimistically as Wednesday’s consumer confidence.
The ‘Kiwi’ could also see additional strength as a result of Thursday morning’s performance of manufacturing index report. However, if the figure prints poorly, New Zealand Dollar bears may become inspired to sell the currency once again.
As always, the AUD/NZD exchange rate is likely to be inspired by global commodity and Asian trade news. With iron ore prices recently fluctuating, the Australian Dollar will likely remain volatile as it acts more directly to iron ore news than the New Zealand Dollar usually does.
At the time of writing, the Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate trended in the region of 1.0812, while the New Zealand Dollar to Australian Dollar (NZD/AUD) exchange rate traded at around 0.9244.
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