New Zealand and Australian dollar currencies fell on Monday as the mounting conflict in Ukraine obscured the prospects for international economic development, thereby trumping any positive financial news from Australia.
The Australian dollar plunged to $0.7181 from a high of $0.7237 on Friday in a 0.7 percent drop before world markets sank again. The market’s resistance levels are at $0.7235 and $0.7284, with support at $0.7150 and $0.7095.
From the $0.6751 level on Friday, the New Zealand dollar also fell by 0.7 percent to $0.6686. The support levels are $0.6656 and $0.6630. The euro suffered the most setback, falling to a nearly 4-month low of A $1.5473 and losing 2.2 percent in the month.
The Geopolitical Upheaval May Hurt Both New Zealand and Australian Currencies
Ray Attrill of FX Strategy says that the Aussie will maintain its performance between $0.696 and $0.7314 till the end of 2022. He also adds that even though this is the case, the bearish influence of the current geopolitical turmoil between Russia and Ukraine should not be overlooked. Russia’s failure to pay up its loans, just like in 1998, was cause for concern.
Attrill adds that the failure of Russia to repay its loan would have a substantial economic effect. This is already seen in a weaker-than-expected euro, a stronger-than-expected US dollar, and, by consequence, a lower Australian dollar.
Businesses in New Zealand had begun struggling due to the Omicron variant. A poll released on Monday shows there was further significant drop this month.
Yuong Ha, the chief economist of the Reserve Bank of New Zealand (RBNZ), mentons in an interview not to judge the impact of the geopolitical turmoil on the economy too early as there could be twists and turns. Instead, he stressed that the RBNZ needed push hard to maintain inflation rates as expected.
Even though New Zealand and Australian dollars are falling, they are projected to recover in time unless a major the Russia-Ukraine unrest deals further blows to the market.
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