Despite generally hawkish Reserve Bank of Australia (RBA) meeting minutes the AUD/NZD exchange rate has fallen ahead of an expected rise in value at today’s GlobalDairyTrade auction.
The last week was a rough one for both the ‘Aussie’ (AUD) and ‘Kiwi (NZD), with the three day run of shock Yuan (CNY) devaluations from the People’s Bank of China (PBoC) severely impacting the entire Australasian basket of currencies. Given its role as the principle export partner of the two South Pacific nations, as well as being the second most influential economy in the world, the resultant decrease in Chinese buying power boded ill.
Nevertheless, hawkish commentary from board members of the Reserve Bank of Australia (RBA) towards the end of the week regarding the potential growth of the domestic economy saw the ‘Aussie’ regaining momentum. Making gains on its rival this pushed the AUD/NZD exchange rate near to a monthly peak of 1.1298 ahead of the weekend.
Yesterday’s RBA meeting minutes for August were decidedly more optimistic than those of the previous month. Governor Glenn Stevens voiced clear confidence in the ability of the Australian economy and currency to adjust to a volatile global commodity market. However, with the optimism of these comments muted by the knowledge of the serious battering the ‘Aussie’ took last week, any positive effect the minutes might have had was ultimately overshadowed by the news of renewed turmoil on China’s stock markets. As stocks saw their largest single drop in three weeks, the chances of a renewed push of Yuan depreciation have undeniably grown.
Later today the GlobalDairyTrade auction is expected to see the value of milk powder begin to rise once more, having fallen in ten of the last eleven sessions. This is good news for the ‘Kiwi’ as the potential of an improved price for New Zealand’s key export has pushed the AUD/NZD exchange rate down further ahead of the event.
The Westpac Leading Index tomorrow is the only other major economic data release for Australia this week. However, any new developments in China are likely to be a significant influence on the ‘Aussie’ over the coming days. Should the Yuan face more devaluation the chances of an interest rate cut at the next RBA meeting will undoubtedly rise, potentially spurring traders to cut their losses and erode the AUD/NZD pairing still more.
New Zealand, meanwhile, is just expecting the release of Credit Card Spending figures on Thursday. If the outcome of today’s dairy auction proves to be positive as expected though the ‘Kiwi’ has every possibility of remaining relatively buoyant throughout the rest of the week, particularly if the rest of the commodity market continues to slide.
At time of writing the Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate remains in a downtrend at 1.1139, while the New Zealand Dollar to Australian Dollar (NZD/AUD) pairing continues to climb in the range of 0.8971.
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