NZ dollar heads for 1.3% weekly fall vs. A$ as Australian economy picks up
By Paul McBeth
May 9 (BusinessDesk) - The New Zealand dollar is heading for a 1.3 percent weekly decline against its Australian
counterpart as data this week shows an improving economy across the Tasman.
The kiwi fell to 92.21 Australian at 5pm in Wellington from 93.39 cents on Friday in New York, and 92.40 cents
yesterday. The local currency declined to 80.36 US cents at 5pm from 86.52 cents at 8am and 86.58 cents yesterday.
This week the Reserve Bank of Australia kept the key rate at 2.5 percent, while acknowledging an improving labour
market, credit growth and consumer spending. The upbeat assessment was reinforced by data showing strong jobs growth
yesterday, while better than expected Chinese trade figures bolstered confidence about Australia’s largest export
market.
“People are waking up to the fact that the Aussie economy is a little bit better than it looks,” said Tim Kelleher, head
of institutional FX sales NZ at ASB Institutional in Auckland. “We expect the kiwi/Aussie cross to continue to drift
off.”
The local currency is heading for a 0.4 percent fall against the greenback from 86.66 US cents on Friday in New York,
while the trade weighted index is heading for a 0.2 percent weekly decline. The TWI was at 80.06 from 80.14 yesterday.
A BusinessDesk survey of 10 traders and strategists on Monday predicted the local currency would trade between 84.80 US
cents and 88.40 cents this week. Six predicted the kiwi to fall this week, while two expected it to gain and two picked
it to remain largely unchanged.
New Zealand’s Reserve Bank deputy governor Grant Spencer today said the central bank doesn’t expect to remove
restrictions on low-equity home lending until at least late 2014 as the limits take demand out of the housing market. He
also reiterated the view that future interest rate hikes will depend on the strength of the currency, which reduces the
prices of imports and takes pressure off headline inflation.
Still, government figures today showed retail spending on credit and debit cards rose last month, with households
confidence still elevated, and employment figures this week showed jobs growth wasn’t seeping into higher wages.
The local currency advanced to 62.38 euro cents at 5pm in Wellington from 62.22 cents yesterday after European Central
Bank President Mario Draghi signalled a potential interest rate cut next month. The ECB kept its key interest rate
steady at a record low 0.25 percent as expected but suggested it might lower it in June if needed.
The kiwi traded at 51.01 from 51.06 British pence after the Bank of England kept its benchmark rate unchanged yesterday.
It fell to 87.80 yen from 88.15 yen yesterday.
(BusinessDesk)