The New Zealand dollar was little changed against its Australian counterpart ahead of the Reserve Bank of Australia's meeting today amid expectations Australia may cut interest rates.
The kiwi traded at 93.44 Australian cents at 8am in Wellington, from 93.40 cents at 5pm yesterday. The local currency advanced to 73.11 US cents from 72.63 cents yesterday as commodity currencies gained following higher oil prices.
Traders are sitting on their hands as they await the main event in the Australasian day, the Reserve Bank of Australia's decision on interest rates scheduled for release at 4:30pm New Zealand time. Weaker global inflation, driven by lower oil prices, has prompted many central banks around the world to reduce interest rates. Last week, New Zealand's central bank removed its tightening bias and opened the door to possible rate cuts, and in Australia traders are currently pricing in a 62 per cent chance of a cut today, according to the Overnight Index Swap curve.
"All eyes will be on the Reserve Bank of Australia, as it answers the question of whether it will cut rates at its first meeting for the year," ANZ Bank New Zealand senior economist Sharon Zollner said in a note. "We think there's a decent chance of a cut but on balance expect the RBA board to hold off and flag a rate cut for next month. Either way, monetary policy will be eased."
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The New Zealand dollar would probably spike briefly higher should the RBA cut rates, provided it also signals a further easing bias, Zollner said..
The kiwi is likely to trade between 93 Australian cents and 93.80 cents today, ANZ said.
New Zealand Reserve Bank deputy governor and head of financial stability Grant Spencer was scheduled to speak this morning to a Hawke's Bay Chamber of Commerce breakfast, although his talk wasn't expected to be released publicly. Governor Graeme Wheeler is due to speak tomorrow to the Canterbury Employers Chamber of Commerce in Christchurch.
Quotable Value's latest report on nationwide values is due out at midday today while ANZ's monthly commodity price index is scheduled for release at 1pm.
Overnight, traders will be eyeing the latest GlobalDairyTrade auction to see if prices are recovering for New Zealand's largest export.
The New Zealand dollar advanced to 64.47 euro cents from 64.21 cents yesterday, gained to 48.62 British pence from 48.15 pence and edged up to 85.64 yen from 85.57 yen.
The trade-weighted index rose to 75.81 from 75.55 yesterday.