NZ dollar falls to 5-mth low vs Australian dollar as Battellino talks up lucky country

Thursday 26th November 2009

The New Zealand dollar tumbled to a five-month low against its Australian counterpart and held above 73 US cents after Reserve Bank of Australia Deputy Governor talked up the state of the so-called ‘lucky country’s’ economy.

The RBA’s Rick Battellino told a conference in Melbourne yesterday that Australia’s economy has entered a “new upswing” and that it’s reasonable to assume growth will continue for “a few more years yet,” underpinning support for the Australian dollar, which climbed 0.4% to 92.67 U.S. cents. Stocks on Wall Street climbed and investors turned to commodities as an alternative to the greenback amid more upbeat U.S. housing and employment data. The Dollar Index, a measure of the greenback against a basket of six currencies, fell 0.5% to 74.45 as the Russian central bank said it will diversify some of its foreign reserves into Canadian dollars.

“Despite the U.S. dollar weakness, the kiwi underperformed relative to the rest of the world’s currencies,” said Mike Jones, strategist at Bank of New Zealand. “Battellino’s speech was more upbeat on Australia’s economy and reminded everybody that New Zealand’s different.”

The kiwi sank to 78.39 Australian cents from 78.76 cents yesterday, and was little changed at 73.01 U.S. cents from 73.02 cents. It fell to 64.53 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 64.84 yesterday, and dropped to 63.75 yen from 64.36 yen. It was little changed at 43.67 pence from 43.70 pence yesterday and declined to 48.24 euro cents from 48.64 cents.

Jones said the currency may trade between 72.20 U.S. cents and 73.50 cents today and will probably test the top of the range as investors remain upbeat after pick-up in sentiment offshore.

Today’s National Bank Business Outlook may show a slightly weaker headline as businesses begin to get wary of the pace of New Zealand’s economy recovery, Jones said. “We may see the headline ease off from recent highs – the survey will dictate direction for the kiwi today,” he said.

Australia’s third quarter capital expenditure data may keep the kiwi under pressure on the trans-Tasman cross, and a stronger than expected result could push it towards 78 Australian cents, Jones said.

Markets in the U.S. will be closed for Thanksgiving today, and heading into month-end on Monday there might be greater volatility in the kiwi on the reduced liquidity.

Businesswire.co.nz

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