September 30, 2011

Australian Dollar & New Zealand Dollar Outlook

In the short-term, I agree with Axel that the New Zealand dollar may rise faster. The Reserve Bank of New Zealand is going to have to start raising rates. The political winds are blowing in the right direction there – you’ve got the National Party firmly in charge – but you know that can change in a few years. The NZ Labour Party, when they come to power, has the potential to do some stupid things to undermine progress. I think that conservative forces have a better chance of holding on for the long term in Australia than in New Zealand. I like that kind of consistency.

Further, the balance of payments situation in Australia is more favorable, and I expect that they are going to benefit more from rising commodity prices than New Zealand.

New Zealand is strong in agriculture, but the Aussie dollar has much more exposure to raw materials, mining, and energy. The trends that I forecast in those commodities should bode well for the balance of trade in Australia and for its currency.

Plus, Australia already has higher interest rates than New Zealand; so, you start off by getting a higher return when you own the Aussie dollar because you’re getting paid more. - Five Favorite Currencies for the Next Five Years research report

Tickers: AUDUSD forex, NZDUSD forex, CurrencyShares Australian Dollar Trust (NYSE:FXA),

Peter Schiff`s comments on the economy, stock markets, politics and gold. Schiff is the renowned writer of the bestseller Crash Proof: How to Profit from the Coming Economic Collapse.
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