AUD/USD and NZD/USD Fundamental Daily Forecast – Drop in Demand for Risk Pressuring Aussie, Kiwi

The Australian and New Zealand Dollars are trading lower on Tuesday, partly pressured by a stronger U.S. Dollar which rose as uncertainty weighed over the health of North Korean leader Kim Jong Un. Aussie Dollar traders also reacted to the release of the Reserve Bank’s (RBA)monetary policy meeting minutes, while in New Zealand, Reserve Bank (RBNZ) Governor Adrian Orr sunk the Kiwi for the second time in a week after he said he was open-minded on the idea of directly monetizing sovereign debt.

At 07:38 GMT, the AUD/USD is trading .6290, down 0.0046 or -0.75% and the NZD/USD is at .5976, down 0.0063 or -1.04%.

Aussie, Kiwi Pressured by Reports Surrounding Health of North Korea’s Dictator

The U.S. Dollar climbed against most major currencies after news that the U.S. is monitory information surrounding the health of North Korea’s dictator.

The U.S. has information that North Korea’s Kim Jong Un was in critical condition after undergoing cardiovascular surgery last week, Bloomberg reported. CNN said America has intelligence that he’s in grave danger. Yonhap reported that South Korea denied the media reports.

The news is negatively affecting the Australian and New Zealand Dollars because of concerns over Kim Jong Un’s successor should the current dictator die. This “great unknown” is making Aussie and Kiwi investors nervous because a potential worst-case scenario suggests there could be a disruption to trade in the region should another hardline dictator resume control.

Reserve Bank of Australia Monetary Policy Meeting Minutes

The RBA’s minutes for its April meeting, released earlier Tuesday, showed the “Board remained committed to supporting jobs, incomes and businesses” as the country responds to the coronavirus outbreak.

In the minutes, members also noted that “the Australian banks were in a strong position to withstand the large economic shock” from the COVID-19 outbreak and financial market volatility.

RBNZ Governor Adrian Orr Open to Idea of Directly Monetizing Sovereign Debt

Reserve Bank of New Zealand Governor Adrian Orr said Tuesday he remains “open minded” about the direct monetization of government debt.

Whether direct or indirect, his central bank already looks on course to end up owning 27% of the South Pacific nation’s debt by the end of February, according to Bloomberg calculations.

The need for massive government spending to pull New Zealand’s economy through the coronavirus crisis, and a growing number of advocates for debt monetization around the world, make it a real possibility for the RBNZ.

“Direct monetization, I know, has been heresy, taboo for long time, but it’s only a long time in our lifetime,” Orr said. “It’s not a mysterious issue. It’s not how we’ve run business.”

Orr said direct debt monetization comes with “as many risks as opportunities” but that “you shouldn’t rule any option out.”

Daily Forecast

Unless there is a turnaround in demand for risky assets, lower equity prices and plunging oil price should exert pressure on the commodity-linked Australian and New Zealand Dollars.