The so-called "parity party" with the Australian dollar is taking its time to get going, with the cross rate going in reverse yesterday after first-quarter inflation across the Tasman turned out to be a little higher than the market had expected.
Before yesterday's data, market expectations were heavily in favour of the Reserve Bank of Australia (RBA) cutting its official cash rate next month, thereby widening the gap between the two countries' interest rates, putting more downward pressure on the Aussie dollar and upward pressure on the cross rate.
The data showed inflation rose by 0.2 per cent in the first quarter - just one-tenth of a percentage point above market expectations - but enough to push the aussie higher against the US dollar to US77.49c from US77.22c, and taking the cross rate with the kiwi down from A99.40c to A98.80.
Last week, Australia's unemployment rate fell to 6.10 per cent in March from 6.20 per cent in February, and below market expectations of 6.3 per cent.
The total number of people with jobs rose by 37,700 - double the number economists expected.
This week, RBA governor Glenn Stevens, in a speech delivered in New York, said governments around the world were putting too much weight on monetary policy, raising questions about whether the RBA's easing bias would be enough to revitalise the economy.
All three events together meant the prospects of a rate cut from the RBA on May 5 had become less certain, said Sam Tuck, senior foreign exchange strategist at ANZ Bank.
He said the odds of a cut were now more like 50/50 from 70/30 previously.
But with the cross rate still within striking distance, parity could not be ruled out, he said.
The New Zealand dollar has gained ground in recent days against the US dollar, which has tended to put upward pressure on the NZ/Australian dollar cross rate.
If the flow of data out of the United States continued to point to weakness in the US economy, the kiwi could gain more ground, putting more pressure on the cross rate, he said.
Westpac said the cross rate was likely to remain strong so long as Australia's sluggish economy kept the RBA considering further easing and while the Reserve Bank of New Zealand continued to stick with its 3.5 per cent official rate.
HSBC said that while yesterday's data showed inflation was slightly higher than expected, it remained well contained.
"With underlying inflation comfortably in the lower half of the RBA's 2-3 per cent target band, the door is open for them to consider cutting the cash rate again," HSBC said.
Aussie update
• Inflation rose by 0.2% in the first quarter - just above market expectations.
• Unemployment rate fell to 6.10% in March from 6.20% in February.
• Number of people with jobs rose by 37,700 - double economists' expectations.