Australian, New Zealand Dollar Coming Off 9-Year High

Australian Dollar price action has hit highs seen at the start of this past March and in July of 2008 against its New Zealand counterpart (Chart 1). A wider perspective reveals that these exchange rate levels are at highs last seen in late-2000 (Chart 2).

[B]Chart 1. AUDNZD 04/08-04/09[/B]

Much of this has come on the back of the Reserve Bank of Australian which, during it’s Apr 7th policy-making meeting, stated that the combination of liquidity easing and fiscal stimulus have been sufficient to boost the economy. Markets reacted to the new with glee, interpreting it to insinuate that the RBA would halt it’s rate-cutting campaign.

Reserve Bank of New Zealand on the other hand continued to cut rates yesterday, by half a percentage point to 2.50%. Governor Bollard’s statement implied that a “highly uncertain” economic outcome would occur over the next 12 months.

The combination of the two central bank statements may actually push AUDNZD through these historically high levels.

[B]Chart 2. AUDNZD 04/99-04/09[/B]