The foreign exchange rate for AUD/NZD is ever changing like any other currency pair. How it moves is going to be based on a number of factors you need to interpret. As Australian traders you may be inclined to trade the Aussie dollar versus other currencies instead of trading a non AUD pairing. There is nothing wrong in this choice given your understanding of the economy you live in. Most traders around the world tend to choose their home currency to compare it with another they would understand. It might be natural to consider the AUD/NZD considering the close ties Australia has with the Kiwi. Trade flows are higher with New Zealand in terms of exports. New Zealand tends to import more from Australia than other countries. Australia is also one of the most important partners for New Zealand to make profit. Such a relationship is one that can be easily understood if you live near it or study it for a long period of time, thus you may be quite interested in the foreign exchange rate of this pairing.
Foreign Exchange Rate: The Details of Currency Pairs to Understand
In the AUD/NZD pairing you have the Aussie dollar as the base currency. The base currency as you have learned in other lessons is always equal to 1. It means the New Zealand dollar is going to have the varying rate. In the last month from mid June to mid July 2013 the rates have ranged between 1.20 and 1.16. Note the use of the higher number first. It was done deliberately to tell you the foreign exchange rate for this pairing has headed down for the month. It started out nearer to 1.20, but had a drop the last week of June to under 1.17. The change in rates did not happen in one day. It took time for the loss of value for the AUD.
Simply note that the NZD was the one to gain strength during this time. It may be as a result of the AUD news. Australia news has not been the best for the Australian dollar of late. Often the news determines how a rate will change. Sometimes investors can push a currency pair to react differently from the news; however, this usually happens during a period of consolidation when investors try to push the rate either below or above the support and resistance lines.
This particular currency pair might favour the NZD at the moment; however, the Kiwi is still undervalued overall against the AUD. In other words, the rate is above 1.000 for the Kiwi making it less valuable against the AUD. Its movement from 1.20 to 1.17 allowed it to gain .03 pips at least.
Foreign Exchange Rate Conclusions for AUD/NZD
The conclusion you can draw from the above information is that you need to watch closely how the AUD/NZD reacts to news and investors. There may be a time when the NZD is more valuable than the AUD. In general the economic size of Australia makes this less likely to remain should it happen.