The Australian dollar depreciated for the second consecutive day on Monday, extending its reversal from 1.0750 to levels sub-1.0700 and, according to the Westpac FX analysis team, it could reach 1.06 area before bouncing towards 1.10.
Key Quotes
“Near term, the cross could retest the 1.06 area. The RBA recently shifted its stance in a more dovish direction, cutting the key policy rates and significantly expanding its QE programme. In contrast, the RBNZ MPS this week will need to acknowledge the economy (especially housing) has been stronger than forecast, and while it will announce a cheap bank funding scheme (FLP), we expect signalling about a negative OCR to either remain unchanged or be softened.”
“Yields spreads near term should thus favour the NZD over the AUD. Multi-month, though, the opposite could be true, if the RBNZ cuts the OCR to -0.50% by August 2021 (our current forecast). That should push the cross to 1.10 by March 2021. (10 November).”
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