NZ dollar holds steady over Aussie before RBA meeting

The local currency followed investor sentiment as it ebbed and flowed with Chinese markets re-opening after the Lunar New Year holiday last week. Photo / iStock

The New Zealand dollar held steady against the Australian dollar ahead of the Reserve Bank of Australia's decision on interest rates today.

The kiwi was trading at 92.11 Australian cents at 8am in Wellington, from 92.12 cents at 5pm yesterday. The local currency edged up to 65.82 US cents from 65.71 cents yesterday.

The kiwi has shed 13 percent against its trans-Tasman counterpart over the past year as weak dairy prices dented the local economy and prompted the Reserve Bank to cut interest rates to 2.5 percent.

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Australia's Reserve Bank is expected to retain its benchmark interest rate at 2 percent today, but keep open the possibility of future easing if required.

"There is no change in policy expected, but markets will be looking for a dovish tilt to the outlook, given the global backdrop," ANZ Bank New Zealand agri economist Con Williams and senior FX strategist Sam Tuck said in a note.

"Should this fail to eventuate then this cross will remain under-pressure."

ANZ expects the kiwi to trade between 91.60 Australian cents and 92.80 cents today.

In New Zealand today, the fourth-quarter terms of trade data will be released at 10:45am.
The New Zealand dollar advanced to 60.51 euro cents from 60.14 cents yesterday after weak Eurozone inflation data stoked expectations the European Central Bank will ease further.

The local currency edged lower to 47.32 British pence from 47.42 pence, and to 74.34 yen from 74.46 yen.

It gained to 4.3129 yuan from 4.3022 yuan after China's central bank cut its reserve requirement ratio for banks by 50 basis points amid capital outflows and softening economic activity.

ANZ said the RRR cut is expected to immediately inject about 650 billion yuan into the banking system, alleviating a liquidity drain. Still, ANZ says the Chinese central bank may need to lower the rate further given capital outflow pressures may persist in 2016 as the yuan declines.

Today, China releases manufacturing data for February.

New Zealand's trade-weighted index advanced to 71.93 from 71.82 yesterday.