The Business Herald’s markets and banking reporter.

Oz holiday looks sweeter as dollar jumps

The Superman Rollercoaster at Movie World on the Gold Coast.
The Superman Rollercoaster at Movie World on the Gold Coast.

A holiday across the Tasman is looking more enticing as the New Zealand dollar gains ground on Australia's currency, which is under pressure from political uncertainty.

The kiwi has gained more than 8 per cent against the Australian dollar since March and reached A96.33c this morning, up from A95.63c on Friday in New York.

And analysts say there is potential for it to achieve parity - equal value - with the aussie in the near future.

That's a boon for New Zealanders planning a jaunt to Sydney or the Gold Coast, but bad news for local exporters who rely on Australia as an export market.

The kiwi dollar has also made strong gains against the British pound and euro since Britain's shock decision to leave the European Union last month.

One New Zealand dollar is buying 53.96p and 64.43 euro cents this afternoon.

Close to 80 per cent of the votes in the Australian election have been counted but neither of the major parties had the 76 seats needed to form a majority government.

Vote counting will resume tomorrow.

Westpac senior markets strategist Imre Speizer said the A96c level had been a "sticky point" for the New Zealand dollar and breaking through it was a significant event.

"What would hurt the aussie more from here is if Australia gets a hung parliament, when all the votes are counted," Speizer said.

He said there was potential for Australia's Reserve Bank to introduce an "easing bias" on interest rates when it meets tomorrow, which would place further pressure on the currency.

"The next big level [for the kiwi dollar] is A96c up to A98c and if momentum is still positive at that point, I'd say people will start talking about parity again," Speizer said.

He said there was potential for parity to be reached "in the months ahead".

However, the pressure on the Australian dollar could prove short-lived if a clear result in the election is swiftly reached and that country's Reserve Bank introduces an easing bias on rates "but no more than that", Speizer added.

The kiwi nudged parity against the Australian dollar last year, rising as high as
A99.53c in April, before plunging to below A88c over the next couple of months.

Alex Hill, head of corporate FX at NZForex, also said parity with the Australian dollar was achievable.

"It's going to be very dependent on the inflation numbers that we see out of Australia and New Zealand in the short-term," Hill said.

He said retail sales figures reported in Australia tomorrow would be another important driver of the aussie's trajectory.

"Retail sales and the [Reserve Bank] statement will put the focus back to where it should be, which is what the RBA's next move is regarding interest rates."

- NZ Herald

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