Kiwi rises after RBA leaves rates unchanged

BUSINESSDESK: The New Zealand dollar rose against the greenback in local trading after the Reserve Bank of Australia left its official cash rate unchanged at 3.5%, even as it dimmed its international outlook.

The kiwi increased to 80.40 US cent at 5pm from 80.16 yesterday. That is the highest the currency has traded since May 4. It rose as high as 80.61 cents in local trading.

The trade weighted index climbed to 72.53 from 72.30.

The kiwi was little changed on 78.34 Australian cents from 78.35 cents yesterday at 5pm.

The RBA's announcement was in line with market predictions that the rate would remain on hold after it cut a quarter-point in June and half percentage point in May.

“With inflation expected to be consistent with the target and growth close to trend, but with a more subdued international outlook than was the case a few months ago the stance of monetary policy remains appropriate," governor Glenn Stevens said.

"The RBA is really sticking to the script in terms of its recent outlook," said Dan Bell, currency strategist at HiFX. "The currency is a little bit off the highs we had before the announcement but that is probably to do with positioning.

"The New Zealand dollar has been trending high throughout the day – things aren't ramping away but they are holding on to recent gains which suggest we might see a little bit more upside in the kiwi," he said.

The European Central Bank and the Bank of England will also meet to review its borrowing costs on Thursday.

The ECB is expected to cut its 1% benchmark interest rate by 25 basis points, according to the median average of 57 economists in a Bloomberg survey.

"The ECB will be more important," Mr Bell said. "Most are expecting them to cut rates and any further mention of the long-term refinancing operations will be a big positive for markets."

Markets in the US will be closed on July 4 for Independence Day.

The local currency was little changed after New Zealand's commodity prices fell 2.4% to their lowest level in more than two years in June. The decline was led by dairy products such as milk powder.

That comes before Fonterra's GlobalDairyTrade auction tomorrow morning. Overall prices of dairy products slipped 0.5% at the last auction a fortnight ago.

In May, the dairy exporter flagged the prospect of lower payments for 2013 in the face of weaker global commodity prices.

The New Zealand dollar rose to 63.81 euro cents at 5pm from 63.46 cents yesterday and advanced to 64.08 yen from 63.83 yen. The kiwi fell to 51.19 British pence from 51.26 pence.