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Hot Topic NBR Focus: GMO
Hot Topic NBR Focus: GMO
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NZ dollar gains vs. Australian dollar as China slowdown eyed


The New Zealand dollar extended its rally against its Australian counterpart in local trading as the threat of a Chinese slowdown weighs more heavily on the mineral-rich ‘lucky country'.

Paul McBeth
Wed, 28 Mar 2012

The New Zealand dollar extended its rally against its Australian counterpart in local trading as the threat of a Chinese slowdown weighs more heavily on the mineral-rich ‘lucky country’.

The kiwi dollar rose as high as 78.55 Australian cents, a fresh five-month high, and traded at 78.44 cents at 5pm from 78.38 cents at 8am and 78.12 cents yesterday. The currency fell to 81.82 US cents from 82.17 cents yesterday.

Fears of a slowing Chinese growth have put the brakes on optimism the world’s second biggest economy will continue to buy Australian minerals. That’s adding pressure to the so-called ‘lucky country’, which is already experiencing a two-speed economy where mineral rich Western Australia rockets away from the rest of the nation. That comes ahead of manufacturing figures on Friday which are expected to show dwindling activity in Chinese factories.

Investors “will be looking pretty closely at the Chinese PMI data,” said Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney. “The Aussie dollar is a bit more susceptible to those concerns in the market about a Chinese slowdown,” than the kiwi, he said referring to the Australian currency colloquially.

Australia’s Reserve Bank Governor Glenn Stevens will review monetary policy next week, and traders are betting he’ll trim 60 basis points from the target cash rate, currently at 4.25 percent, over the coming 12 months, according to the Overnight Index Swap curve.

CBA’s Tennent-Brown said interest rate differentials have been driving the trans-Tasman cross-rate over the past few years, when Australia’s benchmark interest rate unusually rose above New Zealand’s. CBA has priced in one more cut to Australia’s cash rate, which will probably come in May, he said.

Traders are betting New Zealand Reserve Bank Governor Alan Bollard and his successor will hike the official cash rate 26 basis points from its current 2.5 percent in the coming 12 months, according to the Overnight Index Swap curve.

The New Zealand dollar fell to 61.38 euro cents from 61.52 cents yesterday, and declined to 51.22 pence from 51.46 pence. It dropped to 67.80 yen from 68.08 yen yesterday, and was little changed at 72.82 on the trade-weighted index from 72.96.

Paul McBeth
Wed, 28 Mar 2012
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NZ dollar gains vs. Australian dollar as China slowdown eyed
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