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NZ dollar rises against Australian dollar

Published: Wed 16 May 2018 08:11 PM
NZ dollar rises against Australian dollar on soft Aussie wage data
By Rebecca Howard
May 16 (BusinessDesk) - The New Zealand dollar gained against the Australian dollar as data across the Tasman continued to point to weak wage inflation and therefore no reason to lift rates anytime soon.
The kiwi traded at 91.83 Australian cents as at 5pm in Wellington from 91.77 cents as at 8am and late yesterday. It was at 68.64 US cents from 68.56 US cents as at 8am in Wellington and 68.92 cents late yesterday.
Australian wages rose 0.5 percent in the March quarter while annual wage growth was 2.1 percent according to figures from the Australian Bureau of Statistics (ABS). The data was in line with expectations according to a Bloomberg poll of 22 economists but underscored a tepid inflationary picture, adding to the view the central bank won't be lifting rates any time soon.
"It touched 92.06 (Australian cents) on the wage price index. It points to rates on hold for longer," said Martin Rudings, senior dealer foreign exchange at OMF.
"Wage growth stuck in the mud at 2.1 percent in the first quarter and likely to stay there or thereabouts for a while yet, the prospect of a rate rise in Australia next year has diminished further," said Paul Dales, chief Australia and New Zealand economist for Capital Economics.
Rudings said, however, the New Zealand dollar is struggling to gain much traction as "there is still quite a lot of dark cloud over the kiwi with the (Mycoplasma) Bovis virus and the low rates," he said.
Concern has been growing about the potential impact of Mycoplasma bovis as government officials try to decide whether to continue attempting to eradicate it or move to long-term management.
Since Mycoplasma bovis was first reported in New Zealand last July, there are currently 39 infected properties in different parts of the country with another 260 under some form of surveillance and Agriculture Minister Damien O'Connor says a further 1,700 are of interest.
"I think it damages the New Zealand Inc brand and the costs associated with managing it are going to hurt," he said.
Looking ahead, he said tomorrow's budget will be keenly watched to see what the government's spending plans are and how they are going to finance them. "The jury is still out on the Jacinda government and the way forward so it will be closely watched," he said.
The trade-weighted index slipped to 72.05 from 72.11. The kiwi traded at 58.01 euro cents from 57.95 cents yesterday and at 4.3704 yuan from 4.3742 yuan. It was at 50.83 British pence from 50.89 pence and to 75.68 yen from 75.74 yen.
New Zealand's two-year swap rate rose 1 basis point to 2.20 percent while 10-year swaps lifted 3 basis points to 3.19 percent.
(BusinessDesk)
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