Forex Flash: NZD/AUD projections scaled back – BNZ

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FXstreet.com (Barcelona) - "The shifts in NZ/AU monetary policy expectations have implications for our NZD/AUD forecasts. In particular, a negative NZ-AU interest
rate differential looks set to remain a weight around the NZD/AUD's neck for longer." writes Research Analyst Mike Jones at BNZ.

"This has seen us scale back the extent of NZD/AUD appreciation we expect this year. Our year-end forecast has been nudged down from 0.8400 to 0.8200." he adds. The direction of this revision fits nicely with our view
 the long-run equilibrium ( LRE ) of the NZD/AUD has shifted down in the past few years.

According to our new terms of trade adjusted PPP model, the LRE of the NZD/AUD has fallen to around 0.7800, reflecting Australia's relatively bigger terms of trade boom. "A lower NZD/AUD LRE suggests the cross may have 
moved from the 0.7800-0.9500 trading range of the 2000's, to something more like 0.7200-0.8500." Jones states.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Forex and Currencies

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