A New Anomaly Breaks Out Down Under

From Guest Writer and Swiss Macroeconomist Karl Weber

What Happened:

Both the New Zealand dollar (NZD) and the Australian dollar (AUD) have fallen from favor among carry traders lately.

Australia’s and New Zealand’s central banks look increasingly likely to cut their key rates from over 7% and 8% respectively as a response to the rapid economic cooling.

But something is happening here. Real interest rates in both the Aussie and New Zealand dollar still stand around 2-3%. That’s the highest among any currencies worldwide.What I Say:

A rare anomaly has taken place: This pair of currencies tends to move in tandem versus the U.S. dollar.

Since March the NZD/USD currency pair has performed badly compared to the Australian dollar. The NZD/USD has already lost 10%, which is a stark contrast to the higher trending AUD/USD.

But this anomaly will not last for long. The New Zealand dollar looks oversold from a technical perspective and should soon start to shine again. Be on the lookout for a stronger kiwi in the months to come…

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