Australian Dollar Rally Against New Zealand Dollar May Peak Near Decade High
The Australian dollar's strong run against the New Zealand dollar over the past year is likely ending, according to banking strategists. The currency pair is now trading near its highest level in 10 years.
Banking experts from Bank of New Zealand and National Australia Bank say the Australian dollar's rally against the New Zealand dollar is running out of steam. The pair is currently trading near decade-high levels but may fall toward 1.14 in coming months.
The shift comes as New Zealand's central bank appears ready to stop cutting interest rates. The Reserve Bank of New Zealand has been lowering rates to boost the economy, which weakened the Kiwi dollar compared to the Aussie.
New Zealand's weaker currency has already impacted the country's tourism industry and contributed to more New Zealanders leaving for other countries. The currency gap between the two neighbors has been one of the largest in years.
Strategists believe the end of New Zealand's rate-cutting cycle will help strengthen the Kiwi dollar again. This would reverse the trend that has made Australian dollars worth significantly more when exchanged for New Zealand dollars.
This shift affects travelers between Australia and New Zealand, trade between the countries, and investment returns. A weaker Australian dollar would make trips to New Zealand cheaper for Aussies while making New Zealand exports more competitive.
Watch for signals from New Zealand's central bank about ending rate cuts, which could strengthen the Kiwi dollar.
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