NZ dollar holds gains as RBA affirms optimism about Aussie

File photo / NZ Herald
File photo / NZ Herald

The New Zealand dollar held gains in local trading after board minutes from the last Reserve Bank of Australia meeting were sufficiently upbeat to affirm investors' views on the growing strength of Australia's economy.

Global nerves over China and the Crimean peninsula also eased.

The kiwi traded at 85.59 US cents at 5pm in Wellington from 85.67 cents at 8am, up from 85.32 cents yesterday. The trade-weighted index advanced to 79.85 from 79.70 yesterday.

Minutes to the RBA's policy review this month reiterated the central bank's stance to keep the key rate at 2.5 percent for the time being, with low interest rates having the desired effect in supporting the economy. The minutes added to other positive, recent Australian data, including 20-year high employment growth in February. The Australian dollar rose to 90.83 US cents at 5pm in Wellington from 90.33 cents yesterday.

The minutes added to the upbeat tone among investors after stronger than expected US industrial production figures. That helped spur a rally on Wall Street yesterday, as tensions between western nations and Russia ease and the People's Bank of China doubled the yuan's trading band, seen as supporting the world's second-biggest economy.

"People are more comfortable trading the Australian domestic story with the event risk from China and Crimea backing away a little bit," said Sam Tuck, senior FX strategist at ANZ Bank New Zealand in Auckland.

"The better US data is a long-term reason for the US dollar to appreciate, but in an environment of fear they got people more optimistic and willing to invest in carry trade" which helped support the kiwi dollar, he said.

Traders are looking to the Federal Open Market Committee meeting on Wednesday in Washington, when US policymakers are expected to cut monthly bond-buying to stimulate the economy by a further US$10 billion a month to US$55 billion.

New Zealand's current account deficit for the last three months of last year are due tomorrow and narrowed to $1.41 billion from $4.78 billion in the September quarter, according to a Reuters survey of economists.

ANZ's Tuck said the data won't weigh on the kiwi dollar, nor will fourth-quarter gross domestic product figures the following day, which will likely show quarterly economic growth of about 0.9 percent.

GDP is "not expected to detract to the strength of the domestic story, and it's already priced into the currency," Tuck said.

The kiwi rose to 51.45 British pence at 5pm in Wellington from 51.28 pence yesterday ahead of UK employment figures and the government budget this week.

The local currency gained to 87.16 yen from 86.62 yen yesterday, and traded at 61.44 euro cents from 61.35 cents. It declined to 94.22 Australian cents from 94.43 cents yesterday.

- BusinessDesk

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