© Joseph Capurso
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The Aussie and the Kiwi both have been significantly outperforming for the past three-four trading days.The reason is mainly because of the positive surprise provided to the markets by the European leaders at the summit last week. That is easing concerns about the financial disruption that might start in the world and imminent from Europe. Commodity currencies do very well when these concerns about financial disruption ease. Therefore, the Aussie and the Kiwi both show very strong performance.
Do you expect the RBA to keep its cash rate at 3.5 percent?
We do expect the RBA to keep cash rate where it is. Although, I think there might also be some easing bias. The Reserved Bank governor in the recent speeches has suggested that RBA will be very reluctant to cut interest rate in the short term, because the interest rate is quite low. The risk to the global economy has eased, thus, I think the Reserved Bank governor will do nothing tomorrow.
What is your short and long term outlook for these currencies?
The Australian Dollar will continue to go higher this year. We expect the Aussie to end the year at $1.05. That will reflect mainly a kick-up in the global economy. Particularly a Chinese eco-nomic growth picks up in the second half of this year and that will lift the commodity prices. Therefore, we anticipate the Aussie Dollar appreciation.
The similar story for the New Zealand Dollar, which is also the commodity currency. We expect the Kiwi to lift to 0.83 by the end of the year.