NZ dollar touches new 5-year high vs. A$ on weak Aussie GDP

The New Zealand dollar reached a fresh five-year high against its trans-Tasman counterpart after figures showed Australia's economy grew less than expected in the third quarter.

The kiwi rose as high as 90.54 Australian cents in the local session, and traded at 90.31 cents at 5pm in Wellington from 90.01 cents yesterday. It fell to 81.85 US cents at 5pm from 82.54 cents at 8am, little changed from 81.79 cents yesterday.

Australia's gross domestic product grew 0.6 percent in the three months ended Sept. 30, missing the 0.8 percent growth forecast in a Reuters poll of economists. The weaker than expected growth added to expectations among investors that the Reserve Bank of Australia may have to cut interest rates further, having kept the key rate unchanged at 2.5 percent for its last four meetings.

In contrast, rising dairy prices at Fonterra Cooperative Group's online auction and accelerating building activity kept investors upbeat about New Zealand's economy, and may underpin the need for the Reserve Bank of New Zealand to increase the official cash rate from its 2.5 percent.

"New Zealand's fundamentals certainly stack up - farmers are heading for the biggest pay-out potentially on the back of some of the auctions going through for our biggest export," said Stuart Ive, senior client adviser, foreign exchange and derivatives at OM Financial in Wellington. "The kiwi/Aussie is targeting the 90.90 area and should continue to do so for the remainder of this week."

The local currency weakened against the greenback in tandem with its Australian counterpart on the weaker than expected GDP number, ahead of US non-farm payrolls on Friday in Washington. The US employment figures will give traders a steer as to how close the Federal Reserve might be in paring back its monthly asset purchases.

OM Financial's Ive said the kiwi may trade between 81.50 US cents and 82.60 cents until the US employment figures are released.

The trade-weighted index was little changed at 77.07 at 5pm in Wellington from 77.10 late yesterday. The local currency fell to 83.97 yen from 84.37 yen yesterday and declined to 60.26 euro cents from 60.49 cents. It traded at 49.95 British pence from 49.97 pence.

(BusinessDesk)