Currency traders are starting to price in a greater chance of the Australian dollar plunging to parity against its New Zealand counterpart for the first time as interest rates diverge in the two nations.
Australia’s dollar slid to a five- year low versus the New Zealand currency before the bigger nation’s Reserve Bank deputy governor speaks tomorrow amid speculation his central bank will curb strength in the currency.
Perhaps the Federal Reserve has something to learn from the central bank of New Zealand about how to manage a mortgage market. Unlike the Fed, which has been sharply criticized for having failed to keep the U.S. housing bubble from expanding, the Reserve Bank of New Zealand is sounding the alarm over rising housing prices and imposing limits on mortgages.
Australa’s dollar rose versus most of its major peers after Chinese leaders unveiled the biggest economic reforms since the 1990s, buoying the outlook for the South Pacific nation’s exports to the world’s No. 2 economy.
New Zealand’s dollar fell against its Australian counterpart from a five-year high after inflation expectations in the smaller nation topped out this quarter, damping the prospects for a rate increase.
Reserve Bank of New Zealand Governor Graeme Wheeler said the nation’s currency may be driven higher when he starts raising interest rates next year, as major economies are unlikely to increase borrowing costs.
New Zealand’s currency traded near its highest level in more than a week after a report showed employers increased hiring more than economists forecast, adding pressure on the central bank to lift record-low interest rates.