Dollar little changed vs AU$ as RBA keeps rates on hold

The New Zealand dollar was little changed against its trans-Tasman counterpart after the Reserve Bank of Australia kept the key rate unchanged and said it expected inflation to remain in check.

The kiwi traded at 91.26 Australian cents at 5pm in Wellington from 91.29 cents immediately before the release and 91.28 cents yesterday. The local currency traded at 85.21 US cents at 5pm from 85.23 cents at 8am and 85.10 cents yesterday.

The RBA kept the target cash rate at 2.5 percent, as expected, in a bid to spur on growth in a sluggish economy. Governor Glenn Stevens said inflation had been bolstered by last year's decline in the Australian dollar, though modest wage growth expectations "should keep inflation consistent with the target even with lower levels of the exchange rate." The RBA continued to say a period of stable interest rates was the most prudent course.

"On Friday is the Australian quarterly monetary policy statement, and maybe that's what the market will choose to use to get a clear picture on the economy rather than the rate review," said Mark Johnson, senior dealer foreign exchange at OMF in Wellington. "The kiwi and the Aussie are probably getting sold on rallies at the moment."

The RBA kicks off a series of central bank policy reviews this week, including the Bank of England, European Central Bank and Bank of Japan. Still, none of the banks are expected to change policy this week.

Traders are awaiting Fonterra Cooperative Group's GlobalDairyTrade auction for a gauge on how New Zealand's biggest exporter is faring after dairy prices fell to their lowest level since December 2012 in the last fortnightly auction.

The local currency traded at 87.35 yen at 5pm in Wellington from 87.37 yen yesterday, and was at 63.49 euro cents from63.40 cents. It was little changed at 50.52 British pence from 50.57 pence yesterday. The trade-weighted index was at 79.77 from 79.74 yesterday.

(BusinessDesk)