Recent events have made our forecast that both the Australian and New Zealand dollars will weaken to around US$0.65 next year look aggressive. But while the risks to those forecasts lie on the upside, we still think that a narrowing in expected interest rate differentials will weaken the Aussie and kiwi dollars. After all, for the first time since the turn of the century, interest rates in Australia and New Zealand next year may fall below those in the US.
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