NZ dollar falls vs Aust dollar as interest rate tracks diverge

Tuesday 2nd October 2018

The New Zealand dollar fell against its Australian counterpart as the upbeat economic outlook from the Reserve Bank of Australia underlined the divergent interest rate tracks of the trans-Tasman neighbours.

The kiwi declined to 91.36 Australian cents at 5.30pm in Wellington from 91.63 cents yesterday. It traded at 66.10 US cents from 66.14 cents.

The New Zealand Institute of Economic Research's quarterly survey of business opinion showed firms were the gloomiest they've been about the economy in nine years, blaming government policy and rising labour costs. That affirmed expectations New Zealand's Reserve Bank has no case to move the official cash rate from a record low 1.75 percent.

RBA governor Philip Lowe earlier today said Australia's economy grew strongly in the June year, with annual growth forecast to be a little higher than 3 percent in 2018 and 2019. The RBA kept the cash target at 1.5 percent today and investors expect it will start raising rates before the RBNZ.

Martin Rudings, senior dealer foreign exchange at OMF, said the more optimistic RBA underlines the different policy stances between the central banks.

"There's a good chance the kiwi/Aussie cross will go down a bit further."

The GlobalDairyTrade auction may see a small decline in dairy prices overnight.

Rudings expects the kiwi/Aussie cross will move towards 90 Australian cents and eventually to 89 cents.

New Zealand's two-year swap rate decreased 1 basis point to 2.01 percent, while the 10-year swap was unchanged at 2.88 percent.

The local currency traded at 50.69 British pence from 50.76 pence yesterday and at 57.11 euro cents from 57.05 cents yesterday. It edged down to 75.30 yen from 75.35 yen and fell to 4.5384 Chinese yuan from 4.5432 yuan. The trade-weighted index was at 71.87 from 71.88 yesterday.

(BusinessDesk)

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