Forex Flash: NZ-US interest rate differentials consistent with a NZD/USD around 0.8400 – BNZ

According to Currency Strategist at BNZ Mike Jones, latest NZD/USD down move “ran out of puff” yesterday, stalling around the 0.8190 and bouncing till recent fresh weekly high at 0.8284, last at 0.8268.

“It’s worth noting,” the analyst says, “NZ-US interest rate differentials – a key ‘fundamental’ driver of the NZD/USD ­– have barely budged over the past fortnight. On their own, they are consistent with a NZD/USD around 0.8400. This lends weight to our view that the recent NZD/USD selloff has been driven more by global risk aversion and a speculative positioning than any change in ‘fundamentals,’” he reckons.

Mike adds: “Another key fundamental driver of the NZD – commodity prices – continue to trend higher in world terms. This was confirmed by yesterday’s 1% gain in the ANZ commodity price index. We expect tomorrow’s GDT dairy auction to continue this theme with another increase in milk prices,” he concludes.