Currency talk: Parity with the Aussie dollar a possibility?
Jason Walls and NZForex's Alex Hill discuss the global currency market news on NBR Radio and on demand on MyNBR Radio.
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NZForex head of corporate FX Alex Hill says he will be surprised if the Reserve Bank of Australia (RBA) cuts the official cash rate (OCR) this afternoon.
But he says if rates are cut, the Aussie dollar will depreciate against the kiwi, forcing the New Zealand dollar to potentially go as high as 97.50c.
The market is pricing in a 50% chance of the RBA cutting its interest rates this afternoon.
Mr Hill says parity is not out of the question but there are several levels of “decent resistance” between the current level of the dollar and hitting $1 against the Aussie dollar.
The increasing value of the New Zealand dollar is a thorn in Reserve Bank of New Zealand governor Graeme Wheeler’s side.
Last week, he indicated a higher New Zealand dollar could force the central bank to cut interest rates.
“The exchange rate has been moving higher since September, which could, if sustained, dampen tradables sector activity and medium-term inflation,” Mr Wheeler said.
“This would require a lower interest rate path than would otherwise be the case.”
Mr Hill says he was not surprised by Mr Wheeler’s attempt to jawbone the currency last week.
He says the comments piqued the market’s interests, “we did see the kiwi initially sell off the back of that.”
If there is a consistent rise in the value of the kiwi dollar, he says the market will be keeping Mr Wheeler’s comments in mind.
“If the kiwi gets closer to 70c against the US, that may force the Reserve Bank's hand.”
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NBR Radio
Tue, 03 Nov 2015
Tue, 03 Nov 2015
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Currency talk: Parity with the Aussie dollar a possibility?
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