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28 Mar 2014
NZD/AUD: an updated ‘fair-value’ estimate - BNZ
FXStreet (Guatemala) - A currency research team BNZ explained they recently re-estimated their short-term ‘fair-value’ model for the NZD/AUD to incorporate a fresh year of data. They tend to do this on a 12-monthly basis, shortly after the end of a calendar year.
Key Quotes:
“This update uses a four-year window from January 2010 to December 2013 (the last update incorporated the years 2009-2012)”.
“The extra year of more recent data brings our ‘fair-value’ estimate closer to the current level of NZD/AUD. The ‘fair-value’ range is now 0.8900-0.9100 (previously 0.8600-0.8800). In essence, it signals that the NZD/AUD is modestly overvalued relative to current (relative) levels of interest rates, commodity prices, and business confidence (to the tune of about 4%)”.
“As previously discussed, we expect ‘fair-value’ to move up toward the current level of NZD/AUD, rather than a sharp correction the other way around".
"Bearish momentum on the AUD in the latter part of 2013 helped push the NZD/AUD away from the model’s estimates, but our projection of improving NZ-AU interest rate differentials over the next six months should see some closing of that gap. We expect a very modest decline in the NZD/AUD over the next two years, settling to 0.9300 by end-2014 and 0.8900 by end-2015”.
Key Quotes:
“This update uses a four-year window from January 2010 to December 2013 (the last update incorporated the years 2009-2012)”.
“The extra year of more recent data brings our ‘fair-value’ estimate closer to the current level of NZD/AUD. The ‘fair-value’ range is now 0.8900-0.9100 (previously 0.8600-0.8800). In essence, it signals that the NZD/AUD is modestly overvalued relative to current (relative) levels of interest rates, commodity prices, and business confidence (to the tune of about 4%)”.
“As previously discussed, we expect ‘fair-value’ to move up toward the current level of NZD/AUD, rather than a sharp correction the other way around".
"Bearish momentum on the AUD in the latter part of 2013 helped push the NZD/AUD away from the model’s estimates, but our projection of improving NZ-AU interest rate differentials over the next six months should see some closing of that gap. We expect a very modest decline in the NZD/AUD over the next two years, settling to 0.9300 by end-2014 and 0.8900 by end-2015”.