Friday 3rd June 2016 |
Text too small? |
The New Zealand dollar gained against the Australian dollar as divergent interest rates and a weaker Australian economy prompt investors to favour the kiwi.
The kiwi hit 94.42 Australian cents overnight, almost matching the three-month high of 94.43 cents reached the previous night. The local currency was trading at 94.14 Australian cents at 8am in Wellington, from 94.10 cents at 5pm yesterday. It slipped to 67.98 US cents from 68.15 cents.
The New Zealand dollar has gained 6 percent against the Aussie the past month as weaker economic indicators in Australia prompt investors to price in the chance of further interest rate cuts in Australia while New Zealand is seen pushing rate cuts out to later in the year. Australia's benchmark interest rate already sits at 1.75 percent, below New Zealand's benchmark at 2.25 percent.
"New Zealand offers a better story, a better reward, in terms of interest rates and on the economic performance, than Australia does," Peter Cavanaugh, client advisor at Bancorp Treasury Services said. "There's a pool of investor money that likes to sit in Australia and all it does at the margin is decides which side of the Tasman that it wants to be on, and it's come back over here."
Cavanaugh said he didn't forsee the currencies reaching parity. For that to occur, Australia would need to be in recession and New Zealand would need to be booming, or the interest rate differential between the two would need to be more than 1 percent, he said.
"Not only is parity a long way away, but the underlying conditions that would fulfill it are a long way away."
In New Zealand today, Auckland real estate agency Barfoot & Thompson releases its May sales data, vehicle registration figures for May are out. Treasury publishes the government's 10-month financial statements, Statistics New Zealand releases first-quarter building work data, and ANZ publishes its monthly commodity index.
Elsewhere, the US releases non-farm payrolls employment data, China publishes manufacturing data and Australia has services data.
The New Zealand dollar advanced to 60.94 euro cents from 60.81 cents after the European Central Bank kept interest rates unchanged, and edged up its inflation predictions.
The kiwi slid to 73.96 yen from 74.39 yen, edged lower to 47.11 British pence from 47.18 pence, and declined to 4.4741 yuan from 4.4829 yuan. The trade-weighted index was at 73.37 from 73.45.
BusinessDesk.co.nz
No comments yet
Second St John withdrawal of labour takes effect tomorrow with further strikes likely
Sanford Appoints Independent Director
CRP ADVISES CLOSURE OF SHARE OFFER TO EXISTING INVESTOR
Devon Funds Morning Note - 14 August 2024
OCR 5.25% - Monetary restraint tempered as inflation converges on target
Consumers still need due diligence as new deposit takers emerge.
Woolworths strike: staff asked to dress up in Disney costumes for a week on their own dollar
Turners Invests in Quashed Online Insurance Platform
PGW Reports on Challenging Year
Arvida Announces Executive Team Changes