NZD/AUD is now extremely overvalued - Westpac

Imre Speizer, Research Analyst at Westpac, notes that the NZD/AUD cross has been stuck in a 0.9400-0.9600 range for the past month.

Key Quotes

“It does need to fall significantly to reflect the impressive rise in Australian commodity prices although for now markets are focussing on the battering Asian currencies have taken since the US election.”

“Australia’s calendar remains quiet until Wed when we see the first of a flurry of Oct ABS data: building approvals. Oct private credit is due the same day. The highlight though is Q3 capex and investment intentions on Thu 1 Dec. There is no tension over the RBA’s 6 Dec decision (on hold), with the Australian domestic story remaining broadly constructive and key commodities sustaining their stellar gains.”

“3 months: The NZD/AUD cross has failed to break below the 0.93 barrier during the past six months, despite repeated attempts. It is now extremely overvalued according to both our short and long term valuation models, and we expect it to break lower eventually.”