Kiwi follows Aussie higher as expectations for RBA dwindle
The New Zealand dollar followed its trans-Tasman buddy higher after Reserve Bank of Australia governor Glenn Stevens backed the current target cash rate and downplayed the chances of a currency intervention.
The kiwi rose to 83.79 US cents at 5pm in Wellington from 83.17 cents this morning and 83.42 cents yesterday. The trade-weighted index advanced to 76.48 from 76.22.
Mr Stevens told politicians in Canberra there is more stimulus to come from the already reduced interest rates and that it will have an effect as it comes through. While rate cuts are more likely than hikes, he played down the chance of intervention to politicians.
That spurred investors to pare their bets on a rate cut across the Tasman, giving it a 24 percent chance at next month's meeting.
"The market is looking for reasons to trade those ranges both [trans-Tasman] currencies are in," says Alex Hill, strategist at HiFX in Auckland. "I'm not going to start getting too excited about it until the kiwi's in the 82.50 US cents area. There's still room to go up to 85."
Mr Stevens' testimony comes after Reserve Bank of New Zealand governor Graeme Wheeler outlined his criteria for intervening in currency markets at a speech to manufacturers and exporters, which immediately dented the kiwi dollar.
"There's been a little bit of Reserve Bank governor jawboning this week," Mr Hill says.
The kiwi is heading for a 0.8 percent fall against the greenback this week, and a 0.9 percent decline on a trade-weighted basis.
The local currency increased to 78.10 yen from 77.97 yen yesterday and fell to 81.25 Australian cents from 81.49 cents. It increased to 63.44 euro cents from 62.90 cents and was little changed at 54.88 British pence from 54.83 pence.