Kiwi rises against AUD after first quarter GDP across Tasman disappoints

The New Zealand dollar gained against its Australian counterpart after figures showed economic growth across the Tasman was short of economists' expectations, adding to the prospect the Reserve Bank there may have to cut rates again.

The kiwi rose to 83.41 Australian cents at 5pm in Wellington from 83.16 cents immediately before the release and 82.81 cents yesterday. It gained to 80.46 US cents from 80.07 cents at 8am and was little changed from 80.55 cents yesterday.

Investors spurned the Australian dollar after Bureau of Statistics figures showed the economy grew at a pace of 0.6 percent in the first three months of the year, short of the 0.8 percent expansion predicted.

That comes a day after the RBA held the target cash rate at 2.75 percent, while saying there is scope for future cuts if need be. The Australian dollar dropped to 96.42 US cents at 5pm in Wellington from 97.23 cents yesterday.

"The kiwi/Aussie is a bit of a one-way story," says Imre Speizer, market strategist at Westpac Banking Corp in Auckland. "We're thinking [the RBA] will cut in August" wiping out the yield advantage Australia has over New Zealand.

Westpac has a target of 88 Australian cents for the kiwi dollar this year, he says. "We're very bullish."

Local government figures showed the biggest quarterly growth in residential construction in New Zealand for more than a decade, with the volume of all building work up 5.8 percent in the first three months of the year.

Construction is seen as the major driver for the local economy because of the Canterbury rebuild and heating Auckland property market, and today's data may cause more growth than expected in the three months ended March 31.

Dairy prices at Fonterra's online auction fell 5.3 percent today, and ANZ data showed New Zealand commodity prices fell from record highs in May.

The kiwi dollar slipped to 80.21 yen at 5pm in Wellington from 80.32 yen yesterday and dropped to 61.46 euro cents from 61.65 cents. It was little changed at 52.50 British pence from 52.54 pence yesterday, and the trade-weighted index slipped to 75.45 from 75.60 yesterday.

(BusinessDesk)