AUD/NZD drops below 1.14 as Monetary Policies Diverge

Australia’s dollar held near the lowest in more than three weeks against its New Zealand counterpart on speculation the monetary policies of the two nations will diverge before the Reserve Bank of Australia releases next week minutes of its last meeting.

The kiwi dollar was poised for weekly gains against 14 of its 16 major peers after the Reserve Bank of New Zealand signaled yesterday policy makers may raise rates in 2014 and data today showed manufacturing industry expanded. Australian bonds fell as U.S. Treasury yields rose on bets the Federal Reserve will reduce its asset purchases next week.

“The Aussie-kiwi will, in general, remain under some downward pressure,” said Peter Dragicevich, a currency economist in Sydney at Commonwealth Bank of Australia (CBA), the nation’s biggest lender. “The divergence between the RBA and the RBNZ remains clear and that’s keeping the interest-rate differential between Australia and New Zealand skewed in kiwi’s favor. We think there’s a high risk that the RBA does reinsert its easing bias in the minutes.”


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