Kiwi up against Aust dollar after RBA keeps rates on hold, says currency too high

The New Zealand dollar gained against its transTasman counterpart after the Reserve Bank of Australia kept rates on hold and said a further depreciation in the Australian currency would spur more rebalancing of economic growth.

The kiwi dollar rose as high as 84.98 Australian cents, trading at 84.82 cents 5pm in Wellington from 84.69 cents immediately before the statement and 84.60 cents yesterday. It traded at 77.73 US cents at 5pm from 78.05 cents at 8am and 77.70 cents yesterday.

Australia's central bank kept the target cash rate unchanged at 2.75 percent as easier monetary conditions stoke future growth, while saying the current inflation outlook provided "scope for further easing, should that be required to support demand", governor Glenn Stevens says in a statement.

The RBA said Australia's currency was still high despite its 10 percent depreciation and a further decline "would help to foster a rebalancing of growth in the economy". The Australian dollar fell to 91.63 US cents at 5pm in Wellington from 92.12 cents before the announcement.

"The easing bias is going to keep weighing on the Aussie dollar for the time being and the Aussie/kiwi cross is probably the best place you're going to see that because of the different outlooks," says Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney.

"We've got the kiwi at 87 Australian cents through into next year as the RBNZ goes through its tightening call."

The RBA meeting is the first of several this week, including the European Central Bank and Bank of England meetings. The kiwi edged down to 59.56 euro cents from 59.64 cents yesterday and traded at 51.17 British pence from 51.04 pence.

New Zealand commodity prices fell 3.7 percent last month led by a decline in milk powder, though that was offset by a depreciating kiwi dollar, which meant prices rose 0.9 percent in local currency terms.

Traders are looking to US employment figures at the end of the week, which are expected to show slower jobs growth in June than a month earlier. The Federal Reserve has signalled plans to scale back its money printing programme, provided the data stacks up.

The kiwi rose to 77.51 yen at 5pm in Wellington from 77.22 yen yesterday. The trade-weighted index was little changed at 73.79 from 73.75 yesterday.

(BusinessDesk)