NZ dollar near parity with Aussie, may push through on weak Australian inflation

Wednesday 22nd April 2015

The New Zealand dollar traded close to parity with the Australian dollar amid speculation weak Australian inflation data today could push it through the historic milestone. The kiwi touched a record against the euro on concern about whether Greece will exit the common currency.

The kiwi hit 99.59 Australian cents overnight and was trading at 99.51 cents at 8am in Wellington, from 99.35 cents at 5pm yesterday. The local currency touched a fresh record of 72.02 euro cents and was trading at 71.42 cents at 8am from 71.28 cents yesterday. It advanced to 76.65 US cents from 76.51 cents yesterday.

Traders have increased their bets that the Reserve Bank of Australia will cut interest rates at its meeting next month after governor Glenn Stevens, who kept the cash rate unchanged at 2.25 percent last month, said that further cuts were still "on the table". Traders are now pricing in a 63 percent chance that the RBA will reduce rates at its May 5 meeting, up from a 56 percent chance yesterday, according to the Overnight Index Swap Curve.

A report out today is expected to show the Australian consumers price index rose 0.2 percent in the first quarter for an annual rate of 1.3 percent, according to a Reuters survey.

"NZD/AUD remained near historical highs ahead of the Australian Q1 CPI data, and a push for parity remains on the cards," ANZ Bank New Zealand chief economist Cameron Bagrie and senior FX strategist Sam Tuck said in a note. "Weak Australia CPI figures today could see the parity corks popped."

The New Zealand dollar could trade between 98.80 Australian cents and A$1.005 today, ANZ said. Should the kiwi reach A$1, it would be the first time since both currencies were floated in the 1980s.

The local currency touched a fresh high against the euro amid mounting concerns that Greece may exit the common currency as it fails to make progress in reaching agreement on its debt repayments. Reports overnight said European Central Bank staff had proposed to increase the insurance the ECB would demand in return for emergency funding to Greek banks.

The kiwi touched a three month high of 51.79 British pence, and was trading at 51.39 pence at 8am from 51.37 pence yesterday. The Bank of England minutes to its last meeting are scheduled to be released today.

The New Zealand dollar also touched a three month high of 92.10 yen, and was trading at 91.75 yen at 8am from 91.34 yen yesterday.

The trade weighted index, the broad measure of the currency favoured by the Reserve Bank, touched 80.53, its highest level since July last year when it hit a record 82.03. The TWI was at 80.17 at 8am from 80.04 yesterday.

BusinessDesk.co.nz

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