Both the Australian and New Zealand Dollars moved higher versus the US Dollar during trading in Europe as investors consider the likelihood of an interest rate increase from the Federal Reserve. Last week, the Federal Reserve statement tempered investors’ expectations that the Fed would begin raising rates toward the end of this year; the more dovish statement from Janet Yellen pushed back speculation that the rate hike might not occur until early 2016. In support of that speculation, the Fed’s outlook was lowered, both as regards potential growth of the US economy and interest rates in general.
As reported at 8:47 am (BDT) in London, the AUD/USD had been trading at a session peak of 0.7797, before consolidating; currently, the pair is trading at 0.7769, a gain of 0.05% and just a few pips from the session trough. The NZD/USD had hit a session high at 9.6930 during trade in Asia before edging lower; currently, the pair is trading at 0.6884, down 0.37%. Last week, the Kiwi Dollar hit a 5-year trough against the US Dollar after the latest economic data showed a rise of 0.2% GDP in Q1, well off expectations of a rise of 0.6%.
Policy Divergence Pressured Dollar
For the most part, analysts expect antipodean currencies to gain versus the greenback so long as the Fed’s outlook remains dovish and while monetary policies of the Australian and New Zealand central banks diverge. Janet Yellen had said that they were waiting on more concrete evidence of sustained improvement in the US economy before they would make a decision on changing interest rates.