The New Zealand dollar took a pounding on the Australian cross rate today after the Reserve Bank of Australia (RBA) hiked interest rates to their highest since 2001.
Although the rate hike was fully priced in, there had been concerns before the decision about the prospect of a second rate
hike that has also been priced in, BNZ currency strategist Danica Hampton said.
However, the RBA statement was "balanced" rather than hawkish or dovish. It still prompted heavy selling on the aussie-kiwi cross rate, even though the aussie struggled against the US dollar.
Australian retail sales data after the rates decision that came in stronger than expected gave the aussie another boost.
The kiwi slumped to a low of A80.30c but ended at A80.42c, more than half a cent lower than its A81.04c close yesterday.
Against the greenback, the kiwi closed little changed at US61.72c from yesterday's US61.81c close.
The RBA raised its cash rate by 25 basis points to 6 per cent, citing the need to contain inflation in the medium term, and said underlying inflation in the period ahead was likely to exceed its 2.75 per cent forecasts.
"It is clearly worried about underlying inflation trends and skills shortages in the labour market which suggests a further rate rise is more likely than not," said Stephen Koukoulas, chief strategist, Asia Pacific, at TD Securities.
The kiwi lost ground on all crosses and its trade-weighted index fell to 61.39 from 61.68.
The US dollar generally weakened despite robust US data and fairly bullish comment from the new US treasury secretary Hank Paulson - the former chairman of investment brokerage Goldman Sachs in the US.
The dollar fell to a one-month low against a basket of major currencies as investors leant towards the Federal Reserve pausing its two-year string of interest rate rises at a meeting next week.
Any Fed pause would come just as the European Central Bank is widely expected to raise rates to 3 per cent.
The following are Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US61.72c US61.81c
NZ dlr/Aust dlr A80.42c A81.04c
NZ dlr/euro 0.4812 0.4851
NZ dlr/yen 70.60 70.88
NZ dlr/stg 32.89p 33.13p
NZ TWI 61.39 61.68
Australian dollar US76.72c US76.32c
Euro/US dollar US1.2822 US1.2748
US dollar/yen 114.37 114.66
- NZPA
The New Zealand dollar took a pounding on the Australian cross rate today after the Reserve Bank of Australia (RBA) hiked interest rates to their highest since 2001.
Although the rate hike was fully priced in, there had been concerns before the decision about the prospect of a second rate
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