SYDNEY, Aug 21 (Reuters) – The Australian dollar was poised for its ninth straight weekly rise on Friday, while its New Zealand counterpart weakened as the country’s central bank reiterated the need for interest rates to go further down.
The Australian dollar was last at $0.7197, within striking distance of a 1-1/2 year high of $0.7275 hit on Wednesday.
For the week, the Aussie is up 0.4% so far.
The Aussie has had a solid run since mid-March, when it hit a bottom of $0.5510, as Australia’s economy re-opened earlier than expected and commodity prices stayed buoyant.
The currency is so far up 2.6% this year.
Westpac Chief Economist Bill Evans now expects the Aussie to hit $0.75 by year-end, from previous forecast of $0.72, and $0.80 by December 2021 from earlier expectation of $0.76.
Evans said strong iron ore prices and demand from top trading partner China were key factors driving the gains.
“Other factors which are likely to continue to support AUD are the likely ongoing boosts to risk,” he noted, pointing to central bank and fiscal stimulus globally, developments around COVID-19 vaccines, and Australia’s rising current account surplus.
The New Zealand dollar was last at $0.6540, drifting away from from a one-week high of $0.6652 touched on Wednesday. For the week, it is barely changed and is down 2.7% this year so far.
The kiwi’s wings have been clipped by a more dovish central bank which has flagged negative interest rates as one of its policy options.
Economists predict the Reserve Bank of New Zealand (RBNZ) to take rates into negative territory by early next year.
“This will have the most impact on the AUD/NZD cross, with the AUD still likely to trade higher in an environment of growing central bank balance sheets,” ANZ strategists Daniel Been and Rahul Khare wrote in a note.
The Aussie is set for its sixth straight weekly jump against its NZ peer, after hitting a two-year high of $1.1042 earlier this week. (Reporting by Swati Pandey; Editing by Rashmi Aich)
Source: Read Full Article