Kiwi may rise further after RBA's upbeat outlook

BUSINESSDESK: The New Zealand dollar may extend gains after the Reserve Bank of Australia was slightly more upbeat about the prospects for the "Lucky Country" and less pessimistic on China's slowdown, keeping its target cash rate unchanged at 3.5%.

The kiwi advanced to 82.02 US cents at 5pm in Wellington from 81.96 cents at 8.30am from 81.86 cents yesterday. The trade-weighted index crept up to 73.54 from 73.49 yesterday.

Australia's central bank signalled it was more comfortable about the nation's growth prospects, even as inflation remains low.

Stoking optimism among investors, was governor Glenn Stevens observation that "China's growth has moderated to a more sustainable pace, but does not appear to be slowing further", leaving Europe the "significant area of weakness". 

The Australian dollar slipped to $US1.0575 at 5pm in Wellington from $US1.0585 immediately before the announcement.

"The RBA was a bit more bullish for the currency from what the market expected," said Imre Speizer, market strategist at Westpac Banking in Auckland.

A softer landing in the Chinese economy "will be supportive for the currency and it's possible the kiwi can break 82.25 US cents [in the London session], which is a key resistance."

The RBA's Stevens said monetary policy is easier than it was for most of 2011, with borrowing rates "a little below their medium-term averages".

Mr Speizer said the kiwi may trade between 82.25 US cents and 82.50 cents in Northern Hemisphere trading, with the prospect of a regional bailout for Spain and perhaps Italy stoking investor optimism on the other side of the world.

"There's still the hope the European Central Bank will do some bond intervention," he said.

New Zealand's household labour force survey is the next major local event on Thursday, with economists picking the unemployment rate fell to 6.5% in the three months ended June 30, from 6.7% in the first quarter.

Government figures today showed wage inflation was contained at an annual 2% pace, though accelerating at a faster pace than increasing consumer prices, while total hours worked picked up from a weak first quarter of the year.

Australian employment data set for release on Thursday will also capture the market's attention, with traders looking to test the health of that nation's labour market.

The kiwi was rose to 77.51 Australian cents from 77.44 cents yesterday, and was little changed at 64.18 yen from 64.21 yen. It inched up to 66.169 euro cents from 66.05 cents yesterday and increased to 52.60 pence from 52.50 pence.