Sometimes the NZD/USD exchange rate moves because of what’s happening in New Zealand. Sometimes, it’s because of developments in the United States. Overnight, however, it has moved because of what happened on the AUD/NZD cross rate.
Immediately after the New Zealand elections on September 23rd, AUD/NZD stood at 1.0835. With uncertainty over the new government and its policies, the pair reached a closing high of 1.1267 on October 24th. Since then it has slipped gradually lower as the fears of a big change to the RBNZ’s mandate didn’t materialize and economic data showed the new Administration inheriting a pretty strong New Zealand economy.
AUD/NZD began to unwind some of its gains and last Wednesday reached a closing low of 1.1037 as investors bought back their Kiwi Dollars and some analysts began to recommend outright short positions in the cross. With the very strong headlines in the NAB Survey overnight, these positions have been cut and AUD/NZD has surged from 1.1040 all the way up to 1.1130.
The NZD/USD pair has suffered in this process, with the rate falling almost half a cent from a New York close around 0.6902 to open in London this morning at 0.6856. GBP/NZD has also jumped higher, and is now fully 2 ½ cents off Monday’s low of 1.8887 to open in London this morning at 1.9120.