Tales of the South Pacific Currencies

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The Australian and New Zealand dollars often move in tandem, but these strategists have picked a favorite.

Let's see: both are South Pacific nations, both tend to benefit when investors are hungry for risk, and both have close ties to Asian neighbors.

It's not always easy to choose between the currencies of Australia and New Zealand - but for now, the strategists at Barclays Capital are giving the Aussie the edge.

Stronger commodity prices will do more for Australia, they say, and they expect what they call "benign global growth in the U.S. and Canada" to benefit that country as well.

Central bank policy is a little trickier: the strategists doubt that the Royal Bank of New Zealand will intervene to weaken the kiwi despite recent comments from Prime MinisterJohn Key. But at the same time, they wrote in a note to clients, they believe "the market is already pricing in a 90% probability of a 25bp Reserve Bank of Australia rate cut on 1 May and an aggressive 80bp of cuts by year-end."

Barring unexpected weakness in U.S. or Canadian economic reports, the strategists expect the pair to rise to 1.28 in a month, and 1.27 in three months.



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