NZ dollar falls to 6-week low vs Australian

The Kiwi dollar weakened against its Australian counterpart after the Reserve Bank of Australia left interest rates unchanged.
The Kiwi dollar weakened against its Australian counterpart after the Reserve Bank of Australia left interest rates unchanged.

The New Zealand dollar slid to a six-week low against the Australian dollar after Australia's central bank signalled it had no imminent plans to cut interest rates further, dashing the expectations of some investors.

The kiwi slipped as low as 85.91 Australian cents this morning, and traded at 86.04 cents at 8am in Wellington, from 86.63 cents at 5pm yesterday. The local currency fell to 77.90 US cents from 78.27 cents yesterday.

The New Zealand dollar weakened against its Australian counterpart after the Reserve Bank of Australia left interest rates unchanged as expected and said its policy was "appropriate", contrasting with its previous two statements when it said there was scope to ease policy further. The kiwi has strengthened 6.4 per cent against the Aussie so far this year as a slowdown in mining weighs on the Australian economy, while a housing boom in New Zealand makes the central bank here more likely to hike rates.

"The markets have taken the fact that they deem policy to be appropriate to be a much more neutral bias for the RBA," said ANZ New Zealand senior manager FX Sam Tuck. "We at ANZ still believe they will maintain their bias towards easing but it is going to take more data for them to move back to a more explicit bias for easing."

The Reserve Bank of Australia considers its previous interest rate cuts are beginning to feed through into the economy, Tuck said.

In the short term, the kiwi could decline further towards 85 Australian cents although it is likely to trend up again over the next few months to the 86-88 cent level, he said.

"The kiwi/Aussie has been quite stretched on the topside so we view this as a healthy correction," Tuck said. "The levels now are more consistent with the fundamentals."

Stronger US economic data is also weighing on the kiwi, suggesting the Federal Reserve will start to taper its US$85 billion a month bond buying programme this month. A report in the US yesterday showed manufacturing grew last month at the fastest pace in more than two years.

Meanwhile, prices of dairy products fell in the latest GlobalDairyTrade auction this morning, though volumes held up, extending the elevated levels that saw Fonterra Cooperative Group report record sales last month.

At 10:45am the Statistics department will release a report on the value of building work for the June quarter.

The New Zealand dollar declined to 77.58 yen at 8am in Wellington from 77.76 yen at 5pm yesterday. The kiwi slipped to 59.11 euro cents from 59.32 cents yesterday and fell to 50.03 British pence from 50.31 pence. The trade-weighted index weakened to 73.90 from 74.21.

- BusinessDesk

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