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Forex Flash: Kiwi appeal sweetens – BNZ

FXstreet.com (Barcelona) - The ever-brighter glow of the kiwi’s relative growth and interest rate appeal has been largely responsible for the currency’s recent gains. According to the BNZ Research Team, “Not only are investors worried about a slowing pace of growth in the US and Europe, but Wednesday’s morning’s RBNZ statement reinforced to the market the relatively upbeat NZ outlook.”

The Bank’s comment that growth “has picked up”, alongside it’s ”projection for inflation to gradually rise” has further dimmed the chances of RBNZ rate cuts in the eyes of the market. This can be seen most clearly in the further gains in NZ-AU 3-year swap differentials, which are now back to almost flat.

The NZD/AUD has risen in tandem with these movements in interest rate spreads. Indeed, at 0.8270, the cross is fast closing in on our 0.8300 ‘take profit’ recommendation for the long position we initiated at 0.7980.

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