What’s going on here?
The Australian and New Zealand dollars have surged to multi-decade highs against the yen, driven by robust economic data and optimistic policy forecasts.
What does this mean?
The AUD has nudged up by 0.1% to $0.6672, buoyed by benign US PCE data suggesting a potential rate cut by September. The currency has hovered around 67 cents for the past six weeks. The NZD, meanwhile, climbed 0.3% to $0.6102, rebounding from a 200-day moving average after last week’s dip. Both currencies faltered against the euro due to the French elections, yet their impressive ascent against the yen – with the NZD reaching a 34-year high and the AUD a 17-year high – underscores their resilience.
Why should I care?
For markets: Currencies defy the odds.
The strong performance of the AUD and NZD against the yen emphasizes their attractiveness in a turbulent market. Speculation about a 65% chance of an August rate hike by the Reserve Bank of Australia (RBA) bolsters the AUD’s strength, alongside a 0.7% rise in Australian home prices last month and upward adjustments in home price forecasts. Investors should keep an eye on the RBA’s upcoming minutes and retail trade data for further insights.
The bigger picture: Global economic currents.
The euro’s gain against the AUD and NZD was influenced by the French elections, yet broader economic themes are in play. Marine Le Pen’s far-right National Rally (RN) securing fewer seats than anticipated eased political tensions in Europe. Simultaneously, Australia’s tax cuts designed to reduce living costs and increase household wealth are expected to support the economy further. These factors highlight the interconnected nature of political and economic developments in steering global currency markets.
