(BusinessDesk) - The New Zealand dollar held above 80 Australian cents ahead of the minutes of the Reserve Bank of Australia's last policy meeting amid speculation it has further interest rate cuts to come, narrowing the gap with kiwi rates.
The New Zealand dollar traded at 80.04 Australian cents, near a two-month high, from 79.99 cents at 5pm in Wellington yesterday. The kiwi dollar traded at 84.36 US cents from 84.39 cents.
Australia's central bank cut its key rate a quarter point to 3 percent on Dec. 4 and the minutes of that policy meeting may provide clues to its willingness to ease monetary conditions further to help stoke the economy. By contrast, New Zealand's central bank has indicated its next move is most likely an increase, with inflationary pressures on the horizon.
The minutes "should shed some more light on the recent RBA rate cut decision, and the way ahead," Kymberly Martin, strategist at Bank of New Zealand says. "The market continues to price around 45 bps of further cuts in the coming 12 months, which seems reasonable to us."
Before the release, the New Zealand Treasury releases its half-year economic and fiscal update, which will include its latest thinking on whether it can get meet its target of getting back to surplus by 2015.
Helping keep sentiment positive for growth-linked currencies, stocks rose on Wall Street overnight amid optimism politicians in Washington will make progress in averting the fiscal cliff, due to start in about two weeks.
The trade-weighted index slipped to 75.21 from 75.27. The kiwi fell to 70.67 yen from 70.89 yen.
The local currency fell to 64.09 euro cents from 64.13 cents and fell to 52.07 British pence from 52.21 pence.