AUD/NZD-why the struggle to rally?
September 16th, 2008 · No Comments
- AUD/NZD’s inability to push higher in the past week, especially post the RBNZ’s 50bps rate cut to 7.50% has puzzled many.
- AUD/NZD’s decline seems counter intuitive; one would think that the currency with the inferior relative “fundamentals”, such as relative GDP growth and current account profiles (i.e.: NZD), would underperform, yet this has not held recently.
- If we look at it in the context of the financial market tumult, it might help to explain part of the AUDNZD underperformance.
- The Australian share market is clearly much more heavily weighted towards financials (over 40%).
- These industries simply do not have the same representation in the NZ share index; financials make up about 30%, leaving Australia relatively more exposed to the global financial meltdown. Indeed, NZ sharemarket is more geared toward defensive stocks (~40%) compared to the ASX, where defensive stocks make up only 15%
- The ASX has underperformed the NZSE 50 sharply over the past two months - the NZSE50 is UP 3.4%, while the ASX is DOWN 2.8% - see chart
Tags: Australia and New Zealand
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