Kiwi gains after RBA leaves rates unchanged

The New Zealand gained against its Australian counterpart after the Reserve Bank of Australia kept interest rates on hold, while leaving a future cut on the table if slowing growth and inflation get out of hand.

The kiwi rose to 80.88 Australian cents at 5pm in Wellington from 80.66 cents immediately before the announcement, and down from 81.10 cents yesterday. It fell to 84.12 US cents from 84.46 cents at 8am and 84.55 cents yesterday.

The RBA kept the target cash rate at 3 percent today, with governor Glenn Stevens saying "substantial easing" through last year meant the board did not need to cut further.

Still, the central bank will "assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target over time", he says. The RBA will update its economic forecasts later this week.

"It's negative for the Aussie by leaving the door open for a cut in March," says Imre Speizer, market strategist at Westpac Banking in Auckland. "The kiwi/Aussie cross may have another leg to it."

Mr Speizer sees the kiwi rising to at least 82.60 Australian cents this year as the transTasman economies trade places, with the New Zealand's recovery underpinned by the Canterbury rebuild and Auckland housing boom and the end of Australia's mining boom coming into view.

Adding to the lustre of New Zealand as an investment destination is its relatively high returns. The yield on New Zealand's 10-year government bond was 3.8 percent as at 5pm in Wellington, 29 basis points above its Australian equivalent.

Investors largely ignored New Zealand employment data showing a 0.5 percent increase in wage costs in the December quarter. That comes ahead of the household labour force survey on Thursday, which is expected to show a headline unemployment rate of 7 percent.

The kiwi fell to 77.68 yen from 78.40 yen yesterday and climbed to 62.35 euro cents from 62.03 cents. It declined to 53.40 British pence from 53.85 pence yesterday, and the trade-weighted index slipped to 75.95 from 76.16.


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NZ Market Snapshot


Sym Price Change
USD 0.7125 -0.0001 -0.01%
AUD 0.9413 0.0027 0.29%
EUR 0.6524 -0.0011 -0.17%
GBP 0.5849 -0.0005 -0.09%
HKD 5.5241 -0.0015 -0.03%
JPY 75.0040 0.0330 0.04%


Commodity Price Change Time
Gold Index 1266.8 0.710 2016-10-27T00:
Oil Brent 50.5 0.530 2016-10-27T00:
Oil Nymex 49.7 0.550 2016-10-27T00:
Silver Index 17.6 0.020 2016-10-27T00:


Symbol Open High Last %
NZX 50 6941.9 6949.7 6941.9 0.02%
NASDAQ 5272.2 5274.1 5250.3 -0.65%
DAX 10635.0 10658.0 10717.1 -0.86%
DJI 18234.8 18253.2 18199.3 -0.16%
FTSE 6986.6 6992.3 6986.6 -0.70%
HKSE 23088.8 23157.7 23132.3 -0.77%
NI225 17448.2 17461.0 17336.4 0.63%
ASX 5295.5 5311.4 5295.5 -0.22%