NZ dollar rises to 6 mth high vs. Australian dollar

NZ dollar rises to 6mth high vs. Australian dollar as rate outlook

By Hannah Lynch

March 29 (BusinessDesk) – The New Zealand dollar rose to its highest level in almost six months against the Australian dollar on speculation the Reserve Bank of Australia will cut interest rates as soon as next week as the economy stumbles.

The New Zealand dollar rose as high as 78.89 Australian cents and traded at 78.75 cents at 5pm up from 78.64 cents at 8am. That’s the highest it’s been since Oct. 10. The kiwi was little changed on 81.64 US cents from 81.66 cents at 8am.

Reserve Bank of Australia Governor Glenn Stevens held the cash rate at 4.25 percent at the bank’s March meeting while warning that any material deterioration in the Australian economy would give it scope to cut rates further. Australia’s growth prospects have been dented by signs China’s economy, its biggest export market, is slowing as manufacturers ease output.

“We could easily see the New Zealand/Australian dollar with an 80 on it in the next week,” said Dan Bell, currency strategist at HiFX. The kiwi dollar will “spike 50 to 100 points” against the Australian dollar if the RBA decide to cut rates on Tuesday, he said.

The RBA is expected to slash its cash rate by 69 basis points over the next 12 months, according to the Overnight Index Swap curve, narrowing the gap with New Zealand’s record low official cash rate of 2.5 percent. New Zealand’s central bank is seen lifting the OCR by 25 basis points in the next 12 months.

The New Zealand dollar didn’t move much after the release of the National Bank Business Outlook survey this afternoon. It showed the construction industry is leading business confidence higher, reflecting expectations the Christchurch rebuild is kicking into life. A net 34 percent of businesses expect better times in the year ahead, up six percentage points from the February survey.

In the US, there will be the final reading for gross domestic product for the fourth quarter on Thursday, followed by a further consumer sentiment survey on Friday.

European Union finance ministers will meet in Copenhagen on Friday where it is expected they will decide on plans to shore up the region’s 500 billion euro rescue fund.

The New Zealand dollar rose to 51.35 British pence from 51.22 pence yesterday. The kiwi fell to 67.51 yen from 67.80 yen and slipped to 61.29 euro cents from 61.38 cents. The trade-weighted index decreased to 72.78 from 72.82.

(BusinessDesk)

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