The Aussie Dollar has rallied over 2% against its New Zealand counterpart in the past two weeks, reaching 12-year highs near 1.1600. This significant surge has been driven by diverging monetary policies between the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ), as well as weak economic data out of New Zealand. Investor confidence in the New Zealand Dollar has taken a hit as a result.
Last month, the RBNZ surprised markets with a jumbo 50 basis point rate cut and is expected to lower interest rates further in coming months to support sluggish economic growth. New Zealand’s Gross Domestic Product (GDP) shrank by 0.9% in the second quarter and has contracted in three of the last five quarters.
Earlier this week, data revealed that RBNZ inflation expectations for the last quarter of the year remain anchored at a 2.28% yearly pace. This gives the central bank some leeway for additional monetary easing, as inflation remains under control.
In contrast, the RBA has adopted a more hawkish stance. The Australian central bank kept its benchmark interest rate unchanged at 3.6% last week and warned about upside risks to inflation, reducing the likelihood of any near-term rate cuts. This policy divergence is creating further support for the Australian Dollar against the Kiwi.
As long as monetary policy continues to diverge and New Zealand’s economic data remains weak, the AUD/NZD pair may hold onto its gains, reinforcing the trend in favor of the Australian Dollar.
https://bitcoinethereumnews.com/finance/aud-nzd-eases-from-1-1590-after-hitting-fresh-12-year-highs/
