NZ dollar rises to 4-month high vs. A$ after RBA's Lowe talks down currency

Wednesday 26th November 2014

The New Zealand dollar touched a four month high against the its trans Tasman counterpart after Australia's central bank talked down the value of the nation's currency.

The kiwi touched 91.61 Australian cents and was trading at 91.46 cents at 8am from 91.11 cents yesterday. The local currency slipped to 78.09 US cents from 78.17 cents yesterday after the US annual growth rate was revised up to 3.9 percent, higher than the initial estimate of 3.5 percent and beating the 3.5 percent expected.

The New Zealand dollar weakened against most major currencies after the nation's central bank yesterday published a survey of local firms showing they have pulled back their expectations for inflation. However the kiwi strengthened against the Aussie after Reserve Bank of Australia deputy governor Philip Lowe warned that the domestic currency still remains elevated and a lower exchange rate would be helpful for the economy, adding that the bank expects the currency to continue to decline. The Australian dollar touched a four year low of 85.11 US cents.

"The dip in the Aussie was caused by further dovish rhetoric from the RBA after Assistant Governor Lowe noted that the central bank can still lower rates if there's a need to do so," Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management, said in a note. "Lowe's attempts to jawbone the currency lower reflects the long standing desire of the central bank to bring the exchange rate below the 85.00 mark (against the US dollar) in order to improve the country's terms of trade.

"Lowe's comments could be a hint that the RBA is indeed considering further easing which would be a major surprise to the market given the fact that most participants expect the policy to remain stationary for the foreseeable future."

Today, reports are due on Australian construction and Chinese consumer sentiment.

The New Zealand dollar slipped to 62.56 euro cents from 62.92 cents yesterday, weakened to 49.69 British pence from 49.87 pence and dropped to 91.97 yen from 92.12 yen. The trade weighted index declined to 77.91 from 78.02 yesterday.

BusinessDesk.co.nz

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