NZ dollar falls v Aussie on speculation higher GDP track won't faze RBNZ

The New Zealand dollar fell against the Aussie, reversing its gains yesterday. Photo / File

The New Zealand dollar fell against the Aussie, reversing its gains yesterday when figures showed a stronger track for economic growth, on speculation the data won't faze the Reserve Bank given there's still little sign of inflation.

The kiwi dollar declined to 90.96 Australian cents as at 8am in Wellington from 91.39 cents late yesterday. It traded at 70.10 US cents, little changed from 70.07 cents yesterday. The trade-weighted index was at 73.74 from 73.75.

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The local currency rallied yesterday after figures showed the economy grew 0.6 per cent in the third quarter, meeting expectations, while the second-quarter rate was revised up to 1 per cent from 0.8 per cent.

The revisions followed changes to the way Stats NZ calculates gross domestic product. In its last monetary policy statement on November 9, the RBNZ said underlying inflation "remains subdued", with non-tradables inflation expected to increase gradually and tradables inflation expected "to soften in line with projected low global inflation".

"We suspect, given subdued inflation, that the RBNZ will downplay the implications of the higher GDP level for monetary policy settings," said Sharon Zollner, chief economist at ANZ Bank New Zealand, in a note.

"The revisions to New Zealand's GDP yesterday certainly paint the economy's recent performance in a better light, but mean little for future direction."

No economic data is scheduled for release in New Zealand today and little is expected in Australia or China, with trading generally subdued in the run-up to the Christmas holiday break.

"Typically the NZD performs well over the liquidity-thin holiday period, but we do suspect there will be a decent amount of selling resistance at levels not too far from here," Zollner said.

The kiwi traded at 79.50 yen from 79.46 yen yesterday and at 4.6149 yuan from 4.6018 yuan. It was little changed at 59.08 euro cents from 59.04 cents and traded at 52.40 British pence from 52.42 pence.