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Currency Weekly AUD-NZD: Book your parity party, but not yet

Currency Weekly - AUD-NZD: Book your parity party, but not yet
24, July, 2014

We expect AUD-NZD to challenge parity by the end of the year.

Since the 2011 high, the AUD-NZD cross has fallen about 20% and has come close to making new post-float lows. While the latest increase in interest rates from the RBNZ was widely expected. The jawboning of the currency lower as well as the announcement of a rate pause caused a knee jerk AUD-NZD spike. More importantly it took downward momentum away from the in the cross in the short term. Nevertheless, we believe that there are sufficient structural forces in place to put the cross under renewed downward pressure later this year.

The three main reasons are:

1. Growth prospects seem much stronger in New Zealand than in Australia

2. Australia has seen much bigger falls in its commodity export prices

3. AUD remains more overvalued than the NZD.

We expect AUD-NZD to challenge parity by the end of the year, so pencil in dates for your parity party now.

ENDS

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