NZ dollar surges after RBA stays put, Australian data beats expectations

The New Zealand dollar climbed after the Reserve Bank of Australia kept rates on hold amid an improving economic recovery, and after retail sales and current account data across the Tasman beat expectations.

The kiwi climbed to 82.92 US cents at 5pm in Wellington from 82.38 cents at 8am and 82.11 cent cents yesterday. The trade-weighted index rose to 76.12 from 75.57 yesterday. The Australian dollar climbed to US$1.0235 from US$1.0158 at 5pm in Wellington yesterday.

The local currency followed its Australian counterpart higher after the RBA kept the target cash rate at 3 percent, Australian retail sales rose more than expected in January and the current account deficit unexpectedly narrowed in the December quarter. RBA governor Glenn Stevens said it still has room to cut rates if it needs to, but that last year’s stimulus is still working its way through the system.

Traders have pared back their bets on rate cuts across the Tasman, pricing in 38 basis points of reductions over the coming year, compared to 50 basis points yesterday, according to the Overnight Index Swap curve. The kiwi rose to 81 Australian cents from 80.82 cents yesterday.

“The market was pricing in way too many rate cuts,” said Sue Trinh, currency strategist at RBC Capital in Hong Kong. “The kiwi dollar itself has probably done enough on the downside, and will be reasonably well supported through the rest of the year.”

Global sentiment will continue to drive the trans-Tasman currencies this week with uncertainties over the outcome of the Italian election sapping confidence about Europe’s ability to meet its sovereign debt payments, and with US employment figures looming at the end of the week.

The local currency advanced to 77.24 yen from 76.64 yen yesterday, and increased to 63.62 euro cents from 63.02 cents. It gained to 54.78 British pence from 54.59 pence yesterday.


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