NZ dollar drops near six week low vs. Aussie after RBA's Stevens stays mum on currency

Wednesday 23rd July 2014

The New Zealand dollar touched its lowest in almost six weeks against the Australian dollar after Australian Reserve Bank governor Glenn Stevens refrained from commenting on its high currency in an annual speech he has previously used to talk it down.

The kiwi touched 92.06 Australian cents overnight, its lowest level since June 13, and was trading at 92.25 cents at 8am in Wellington, from 92.36 cents at 5pm yesterday. The local currency slipped to 86.67 US cents from 86.74 cents yesterday, trading between 86.50 cents and 86.96 cents as investors take positions ahead of the Reserve Bank interest rate decision tomorrow.

The Australian dollar advanced after the RBA's Stevens, speaking at an Anika Foundation luncheon in Sydney on challenges for economic policy, didn't make any negative comments about the elevated currency after saying recently he would steer away from trying to jawbone the currency lower.

"The previous year he talked the Aussie down and it dropped 100 points during that lunch, this year he didn't mention the currency at all," said OMF foreign exchange senior dealer Martin Rudings. "He's given up jawboning the currency down, using those cheap shots while he's at an organised luncheon. The market has taken that as he has given up trying to talk the currency down and the market is free to do what they like with it, so it was a positive for the Aussie."

OMF's Rudings said some traders may also be favouring the Aussie over the kiwi amid uncertainty about whether the RBNZ will hike rates tomorrow or pause on signs the economy may be slowing.

"Aussie might be getting a bit of support here as well as people are selling kiwi and buying Aussie," Rudings said. "I suspect that is a bit of positioning ahead of tomorrow's RBNZ. There is probably a greater risk that they don't raise rates in this meeting."

Today, Australia will publish data on second quarter inflation and tonight the Bank of England minutes from its last meeting will be released.

The New Zealand dollar slipped to 87.93 yen from 88.01 yen yesterday, advanced to 64.35 euro cents from 64.13 cents and was little changed at 50.79 British pence from 50.78

BusinessDesk.co.nz

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