Notes from Westpac on updates to their views on the Australian and New Zealand dollars over the past few days:

From February 12 on the AUD/USD

1-3 month view

  • The reversal from 0.81 late Jan to 0.78 mid-Feb has removed much of the apparent AUD overvaluation, setting up for more two-way price action in the weeks ahead.
  • Interest rate markets have moved closer to Westpac's view of no change in the RBA cash rate this year and ample supply remains a risk for bulk commodity prices.
  • But if the global growth outlook remains positive, AUD sentiment should not be too bearish. We look for 0.78 end-March, 0.76 end-June

From 13 February on the NZD/USD

1-3 month view

  • The US dollar is yet to establish an uptrend, which means further gains in NZD/USD beyond 0.74 are possible during the month ahead.
  • Further out, though, we are bearish.
  • The NZ-US interest rate advantage is rapidly shrinking and should eventually weigh, pushing NZD/USD towards 0.69 by mid-year

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