NZ dollar slips vs. Australian dollar after RBA gives no hint of lower rates
By Paul McBeth
Oct. 6 (BusinessDesk) - The New Zealand dollar dipped against its trans-Tasman counterpart after the Reserve Bank of
Australia disappointed traders looking for hints of another rate cut, keeping the target cash rate unchanged and saying
data will inform future movements.
The kiwi fell to 91.28 Australian cents at 5pm in Wellington from 91.61 cents immediately before the release. The local
currency was little changed at 64.99 US cents from 65.04 cents at 8am, and up from 64.65 cents yesterday.
The RBA kept the benchmark rate at 2 percent, with governor Glenn Stevens saying "further information on economic and
financial conditions to be received over the period ahead will inform the board's ongoing assessment of the outlook and
hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with
the target".
He also noted the Australian dollar was "adjusting to significant declines" in commodity prices. Traders were preparing
themselves for the bank to take a tougher line after Australia & New Zealand Banking Group economists changed their house view to predict two more rate cuts next year.
"There's no hints of easing coming up in Australia which was what the markets had priced in," said Imre Speizer, senior
market strategist at Westpac Banking Corp in Auckland. "That's why the Aussie's gone up a bit" and why the kiwi dollar
was weaker on the cross-rate, he said.
The local currency held gains against the greenback was has been declining on the prospect of later and slower interest
rate increases by the Federal Reserve, and as rising dairy prices are seen as supporting the local economy. Traders will
be watching the GlobalDairyTrade auction on Tuesday in the US, which is expected to show another increase in milk
prices.
Westpac's Speizer said the delays to US interest rate hikes and the improving dairy outlook prompted him to revise his
short-term outlook for the kiwi dollar, which he now sees rising over the next few weeks, before reverting to a downward
trend once the Fed starts tightening monetary policy.
New Zealand's two-year swap rate rose two basis points to 2.68 percent, and the 10-year swap advanced four basis points
to 3.5 percent.
Traders largely ignored weaker business confidence in the New Zealand Institute of Economic Research's quarterly survey
of business opinion.
The local currency climbed to 78.27 yen from 77.61 yen yesterday, and rose to 4.1301 Chinese yuan from 4.1091 yuan. It
gained to 58.11 euro cents from 57.55 cents yesterday, and increased to 42.86 British pence from 42.47 pence yesterday.
The trade-weighted index gained to 70.51 from 70.26 yesterday.
(BusinessDesk)