AUD/NZD fair value up to 1.13 – Westpac

Sandeep Kanihama FXStreet Contributor

Sean Callow, Research Analyst at Westpac, suggests that their short term (weekly) fair value estimate of AUD/NZD has not been below 1.10 since July and has risen from 1.11 in early September to 1.13 in late October, mostly due to the outperformance of Australia’s commodity export prices.

Key Quotes

“In particular, coal and iron ore prices have outstripped dairy prices.

The gap between the spot rate (below 1.07 at time of writing) and 1.13 fair value is a function of both 2 year yield spreads and relative commodity prices.

This is key to our expectation that AUD/NZD will trend higher in coming weeks, though we don’t expect such a wide gap to be closed quickly. Fair value estimates are always a simplification of a currency pair’s fundamental drivers, so deviations from the spot rate can persist for some time.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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