Aussie and kiwi slip as NZ jobs miss: what a cross currency pair is

The Australian dollar slipped even after the Reserve Bank of Australia (RBA) raised rates, and New Zealand's jobs data then disappointed. Investing.com reports that the dollar ticked up as traders watched the US midterm elections, while the Aussie fell despite the RBA hike.

In the ECB reference rates (official fixings, one per business day) for 3 November, AUD/USD fell 0.35% to 0.6984 and NZD/USD eased 0.04% to 0.5624. Later that day, investingLive reported that New Zealand's Q3 unemployment rate rose to 5.7%, against 5.5% expected and 5.6% prior. It said the miss could weigh on the kiwi and noted the gap with a more hawkish RBA looks set to widen. Because that release came late on 3 November, these fixings may not include its effect. Meanwhile, investingLive flagged early Kentucky results showing a big swing towards Democrats, and cited The New York Times saying the US could resume combat operations against Iran as early as Wednesday. For the wider news picture, see our sister site's report on the dollar firming as midterm votes were counted.

What is a cross currency pair?

Most currency pairs include the US dollar, such as AUD/USD or USD/JPY. A cross currency pair, or simply a cross, is a pair that does not include the US dollar. Examples are EUR/GBP, EUR/JPY and AUD/NZD.

A cross lets you compare two currencies directly. That matters when the story is about those two economies, not about America. Today's theme is a good case: investingLive frames it as Australia versus New Zealand, a hiking RBA against a weak NZ labour market. AUD/NZD shows that contest without the dollar's own moves getting in the way.

You can calculate a cross from two dollar pairs. When both pairs have USD as the quote currency (the second currency), divide one by the other.

A worked example

The ECB does not publish AUD/NZD, but we can build it from the fixings.

AUD/NZD = AUD/USD ÷ NZD/USD

Step by step for 3 November:

1. 0.6984 ÷ 0.5624 = 1.2418. One Australian dollar bought about 1.2418 New Zealand dollars.
2. On 2 November: 0.7008 ÷ 0.5627 = 1.2454.
3. Change: 1.2418 − 1.2454 = −0.0036, or about −0.29%.

So in the 3 November fixing, the Aussie lost ground against the kiwi as well as against the dollar. AUD/USD fell 0.35%, but NZD/USD fell only 0.04%. The cross captures that difference. Over the five fixings from 28 October, AUD/NZD slid from 1.2530 to 1.2418.

The same method works for euro crosses. EUR/USD at 1.1179 divided by GBP/USD at 1.3411 gives a EUR/GBP of about 0.8336.

Why it matters for new traders

• It isolates the story. If you have a view on Australia versus New Zealand, a dollar pair also carries US risks such as the midterms or Iran headlines. A cross reduces that.
• It explains odd moves. AUD/USD and NZD/USD can both fall while AUD/NZD still moves, because one fell more than the other.
• Costs can be higher. Crosses often trade less than the major dollar pairs, so the gap between buying and selling prices can be wider.
• Timing matters. The NZ jobs miss arrived after the 3 November fixing, so a calculated cross from these rates is a snapshot, not the latest picture.

Key terms

• Cross currency pair: a pair that does not include the US dollar, such as AUD/NZD.
• Quote currency: the second currency in a pair; the price shows how much of it buys one unit of the first.
• Reference rate (fixing): an official daily rate, such as the ECB's, not a live trading price.
• Hawkish: a central bank leaning towards higher interest rates.