AUD/NZD: Undervalued? - Westpac

Sandeep Kanihama FXStreet Contributor

Richard Franulovich, head of FX strategy at Westpac, suggests that terms of trade proxies and interest rate differentials have moved slowly but surely in favour of a higher AUD/NZD in the last three years, but the cross has been mostly unresponsive leaving it notably undervalued.

Key Quotes

“The recent sharp run up in AUD/NZD from around 1.03 to 1.06 in the wake of the dovish RBNZ late March has only made a small dent into unwinding the undervaluation of the cross.”

“In addition to a more favourable commodity and yield story, a relatively stronger data flow in Australia vis-à-vis New Zealand in recent weeks makes for a trifecta of bullish developments for the cross.”

“The cross does not slavishly track the data pulse differential but it nevertheless also points to a notably firmer cross.”

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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