Kiwi ekes out gain after RBA minutes and euro bond buying talk
BUSINESSDESK: The New Zealand dollar rose in local trading after the minutes from last week's Reserve Bank of Australia meeting stoked demand for the trans-Tasman currencies by talking up the resilience of its domestic economy.
The kiwi rose to 81.06 US cents at 5pm in Wellington from 80.86 cents at 8am and 80.92 cents yesterday. The trade-weighted index was little changed at 73.06 from 73.04 yesterday.
The RBA board decided to leave its target cash rate unchanged at 3.5% last week, a level deemed "appropriate", with Australian inflation close to target and growth near trend, according to minutes of the meeting published today.
The board says the global economy is fragile, though China is showing signs of stability.
"Domestically, the picture held up relatively well, with global concerns pushed out to the side and certainly no hints of near-term rate cuts," says Robert Rennie, chief currency strategist at Westpac Banking Corp in Sydney.
"That helped both the Aussie and kiwi on the day," he said, referring to the trans-Tasman currencies colloquially.
The Australian and New Zealand dollars have been benefitting from rumours the European Central Bank will embark on a major bond buying programme next month in a bid to stem the region's sovereign debt crisis and protect financial stability.
"Central banks are giving the impression something pretty impressive is coming," Mr Rennie says.
The kiwi will probably continue to trade in a range of between 80.50 US cents and 81.50 cents for the rest of the month as the Northern Hemisphere summer holiday winds down, he says, before the major events such as the central bank summit at Jackson Hole, Wyoming, and the ECB's meeting kick off in September.
When the New Zealand dollar rises above 81.25 US cents it is looking relatively expensive, he says.
The kiwi dollar slipped to 77.28 Australian cents from 77.37 cents yesterday and was little changed at 65.58 euro cents from 65.63 cents.
It traded at 64.28 yen from 64.30 yen yesterday and was little changed at 51.53 British pence from 51.55 pence.