NZ dollar pares gain vs. Aust after RBA cuts key rate to 2.5 percent
By Paul McBeth
Aug 6 (BusinessDesk) - The New Zealand dollar pared gains against its Australian counterpart after the central bank cut
interest rates across the Tasman, matching the local key rate, but without indicating if there’s scope for further cuts.
The kiwi fell to 87.47 Australian cents at 5pm in Wellington from 87.72 cents immediately before the announcement and
87.53 cents yesterday. The local currency traded at 78.51 US cents from 78.05 cents at 8am and 77.71 cents yesterday.
The Reserve Bank of Australia cut the target cash rate a quarter point to 2.5 percent to help stoke a slowing economy.
Governor Glenn Stevens said the economy has been below trend in the past year, and while a weaker Australian dollar has
helped, the currency is still over-valued. Whereas previously he has indicated whether there’s scope for another cut, he
didn’t offer any guidance in today’s statement. The Australian dollar rose to 89.70 US cents at 5pm in Wellington from
89.25 cents immediately before the release.
“The market was a bit short and caught – Aussie rates came up a little bit as people had more cuts priced in,” said
Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney. “That’s what’s driving the Aussie a
little higher.”
The local currency recovered after being sold off yesterday amid a food contamination scare at Fonterra Cooperative
Group, New Zealand’s biggest company. Dairy products account for about a quarter of New Zealand’s exports.
Finance Minister Bill English today told Parliament he expects the local economy will only suffer a small hit from the
food scare. CBA’s Tennent-Brown said tomorrow’s GlobalDairyTrade auction will give a good steer on the market’s reaction
to the news.
Government figures are expected to show New Zealand’s unemployment rate increased to 6.3 percent in the June quarter
from 6.2 percent in the first three months of the year. The jobless rate came down more than expected in the March
quarter.
The local currency rose to 77.11 yen at 5pm in Wellington from 76.76 yen and gained to 51.13 British pence from 50.88
pence. It increased to 59.18 euro cents from 58.54 cents yesterday. The trade-weighted index advanced to 74.37 from
73.81 yesterday.
(BusinessDesk)