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17 Jul 2013
Flash: Weaker USD and fortified AUD has strengthened NZD – BNZ
FXstreet.com (New York) - At around 0.7880, the NZD/USD opened the Asian session threatening to break through the top end of the 0.7685-0.7900 range – “A surging AUD and broadly weaker USD have both conspired to send the NZD higher,” suggests Mike Jones, an analyst at BNZ.
Indeed, yesterday’s seemingly innocuous RBA minutes proved to be the catalyst for a sharp rally in the AUD. The RBA retained its easing bias, but noted the inflation outlook was now stronger thanks to the 10% depreciation in the AUD. In response, the AUD interest rate markets trimmed the chances of an August RBA rate cut to around 50% (from closer to 70%), and the AUD/USD jumped around a cent to above 0.9240.
Moreover, the AUD’s outsized reaction probably had a lot to do with the fact short positions in the AUD had been running close to the highest on record. According to Jones, “The offshore trading session was dominated by profit-taking and position reshuffling, as market’s brace for tonight’s Congressional Testimony from Fed chairman Bernanke. As such, the USD was sold aggressively as investors trimmed large net longs in the greenback.”
Indeed, yesterday’s seemingly innocuous RBA minutes proved to be the catalyst for a sharp rally in the AUD. The RBA retained its easing bias, but noted the inflation outlook was now stronger thanks to the 10% depreciation in the AUD. In response, the AUD interest rate markets trimmed the chances of an August RBA rate cut to around 50% (from closer to 70%), and the AUD/USD jumped around a cent to above 0.9240.
Moreover, the AUD’s outsized reaction probably had a lot to do with the fact short positions in the AUD had been running close to the highest on record. According to Jones, “The offshore trading session was dominated by profit-taking and position reshuffling, as market’s brace for tonight’s Congressional Testimony from Fed chairman Bernanke. As such, the USD was sold aggressively as investors trimmed large net longs in the greenback.”