NZ dollar climbs above 84 US cts after RBA keeps rates at 3 percent, says more scope to cut

The New Zealand dollar rose above 84 US cents after the Reserve Bank of Australia kept its benchmark interest rate at 3 percent as the nation’s spending picks up from a lull, and said it has scope to cut it need be.

The kiwi rose to 84.03 US cents at 5pm in Wellington from 83.75 cents at 8am and 83.52 cents yesterday. The trade-weighted index increased to 76.95 from 76.89 yesterday.

The RBA kept the target cash rate on hold, saying an accommodative monetary stance is appropriate, and held its view that it can cut rates further to “support demand” if necessary. Australia’s central bank has been juggling a slowing resources boom and tepid consumer and housing demand. Traders have been paring back their bets on future cuts with Australian economic data surprising on the upside in recent months.

“It’s not a huge surprise there and the Aussie dollar managed to push up after the announcement and has been a positive, giving the kiwi more upside,” said Dan Bell, currency strategist at HiFX in Auckland. “It seems everyone continues to be happy holding the New Zealand dollar and Australian dollar.”

The kiwi might see some upside this week, though Bell said he expects that to be capped at 84.50 US cents with traders wary about corporate earnings in the new quarter.

Prices for locally produced raw materials jumped last month after prices for whole milk powder surged on dwindling supply against the backdrop of the worst drought in almost seven decades in New Zealand’s North Island.

The RBA meeting kicks off several central bank reviews this week, including the European Central Bank, Bank of England and Bank of Japan.

The kiwi traded at 80.26 Australian cents from 80.31 cents yesterday, and fell to 77.89 yen from 78.53 yen. It increased to 55.12 British pence from 55 pence yesterday, and was little changed at 65.29 euro cents from 64.34 cents.

(BusinessDesk)