NZ dollar creeps higher as RBA rate cut eases concerns for Australian economy
By Paul McBeth
Dec. 5 (BusinessDesk) - The New Zealand dollar followed its Australian counterpart higher after the Reserve Bank of
Australia cut interest rates in line with expectations and soothing fears the world's 12th biggest economy could be in
for a big fall as its mining boom peaks.
The kiwi increased to 82.243 US cents at 8am in Wellington from 82.29 cents yesterday, following the Australian dollar's
lead, which rose to US$1.0472 from US$1.0446. The kiwi was little changed at 78.68 Australian cents from 78.73 cents
yesterday.
The RBA cut the target cash rate a quarter point to 3 percent, the lowest level since the depths of the global financial
crisis and matching a five-decade low. Governor Glenn Stevens said the bank has started seeing signs of looser monetary
policy emerge, and was seen as a move to foster growth outside the resources sector which has underpinned the economy in
recent years. Government figures today are expected to show the Australian economy grew 0.6 percent in the September
quarter.
"The accompanying statement highlighted the negatives, but there were no new negatives and markets are in the mood to
take no news as good news," said Kymberly Martin, strategist at Bank of New Zealand in Wellington. "If the RBNZ comes
out (tomorrow) and points to the obvious things about the economy and provides no new fears, we might have a similar
reaction."
The RBA's review comes two days before the Reserve Bank of New Zealand reviews monetary policy, with governor Graeme
Wheeler tipped to keep the official cash rate on hold at 2.5 percent. That would cut Australia's interest rate advantage
to half a percentage point.
BNZ's Martin said the currency may trade between 82 US cents and 82.60 cents today.
Dairy prices at Fonterra Cooperative Group's online auction fell 2 percent, with the exporters increasing the supply
available. The sale came a day after ANZ New Zealand data showed New Zealand commodity prices rose for a fifth month in
November and after government figures this week showed the country's terms of trade fell to a three-year low in the
September quarter as a strong currency eroded returns on dairy exports.
Global investor sentiment was flat as US policymakers continued to cling to their partisan colours as they struggle to
avert the US$607 billion fiscal cliff of spending cuts and tax increase. The latest deal put forward by senior
Republican and House of Representatives Speaker John Boehner was shot down within an hour by the White House, and
highlighted fractures within the Republican party.
New Zealand's trade-weighted index was unchanged at 73.45, and the kiwi was little changed at 67.51 yen at 8am in
Wellington from 67.57 yen yesterday. The currency traded at 62.95 euro cents from 62.99 cents yesterday, and increased
to 51.20 British pence from 51.09 pence.
(BusinessDesk)