The New Zealand dollar gained against its Australian counterpart after the Reserve Bank of Australia held the target cash rate at 4.25% and said it's waiting on inflation figures before it will act on slowing economic growth.
BUSINESSDESK: The New Zealand dollar gained against its Australian counterpart after the Reserve Bank of Australia held the target cash rate at 4.25 percent and said it’s waiting on inflation figures before it will act on slowing economic growth.
The kiwi rose as high as 79.21 Australian cents and traded at 79.11 cents at 5pm from 78.69 cents yesterday, and advanced to 82.33 US cents from 81.96 cents yesterday.
The RBA held Australia’s benchmark interest as expected, though governor Glenn Stevens said the board “judged the pace of output growth to be somewhat lower than earlier estimated” and was waiting on inflation data before reassessing whether to ease monetary policy.
That puts next month’s meeting in the spotlight for another cut to the rate, and traders are betting the RBA will slice 81 basis points from the rate over the next 12 months, according to the Overnight Index Swap curve.
“The RBA’s likely to wait and see inflation before considering another step to ease policy,” said Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney.
“The kiwi will come under downward pressure, but the kiwi/Aussie should lift a little bet,” he said, referring to the transTasman cross-rate colloquially.
Both risk-sensitive currencies had been riding a wave of optimism after Chinese and US manufacturing figures beat expectations, but Tennent-Brown expects the prospect of a slowing Australian economy will damp appetite for the transTasman dollars.
“It reinforces that offshore events are having an impact on the pretty robust Aussie economy,” he said.
“It services as a reminder that the RBNZ is in no hurry to raise rates, either.”
Traders are betting the Reserve Bank of New Zealand will hike the official cash rate 27 basis points from its current 2.5% over the next 12 months, according to the Overnight Index Swap curve.
The minutes from the Federal Open Committee’s last meeting will be released in Washington DC on Tuesday, and investors will be looking to see if there are any divisions as to whether the US economy needs more stimulus.
The trade-weighted index rose to 73.1 from 72.98 yesterday, and the kiwi fell to 67.44 yen from 68 yen.
It gained to 61.71 euro cents from 61.40 cents yesterday, and was little changed at 51.31 pence from 51.24 pence.
