The Australian dollar hit a 13-year high against the New Zealand dollar! Policy differentiation between the central banks of Australia and New Zealand intensifies, and interest spread trading heats up

The Zhitong Finance App noticed that the Australian dollar rose to a new high in 13 years against the New Zealand dollar. This was mainly driven by the divergent interest rate prospects of the central banks of the two countries and rising metal prices.

After RBA Assistant Governor Sarah Hunt said the central bank might have to raise interest rates again to contain inflationary pressure, the Australian dollar rose as much as 0.4% against the NZD to 1.2332, the highest level since April 2013.

Prior to that, New Zealand Federal Reserve Board member Prasana Guy made a statement saying that cash interest rates may already be in a neutral range.

This trend extended the Australian dollar's increase to 6.2% against the New Zealand dollar this year, which is expected to be the best annual performance in more than 20 years, as traders are betting that the policy interest rate gap between the two countries will widen further. According to swap agreement data, the market expects the Reserve Bank of Australia to raise interest rates at least once more this year, while the New Zealand Federal Reserve may not have a chance to raise interest rates again until February next year.

Furthermore, the Australian dollar was supported by rising prices of its main export metals. Among them, the price of iron ore rebounded above $100 per ton, and the price of copper reached a record high.

Sean Carlow, a senior analyst at ITC Markets in Sydney, said: “The Australian dollar/New Zealand dollar shorts, which previously opened positions based on the better performance of New Zealand's agriculture-based export portfolio, may now be being washed out by the hawkish shift of the Reserve Bank of Australia, the New Zealand Federal Reserve's lack of urgency to raise interest rates again, and strong trends in commodities such as copper prices.”