Kiwi rises as Australian dollar boosted by RBA comments

Friday 6th May 2011

The New Zealand dollar rose against the greenback but lost ground against the Australian dollar after the Australian central bank said more interest rate hikes will be needed to contain inflation.

The NZ dollar had fallen to its lowest level in three weeks on Thursday night as a slide in commodity prices hurt many currencies.

Traders are also cautious ahead of non-farm payrolls data in the United States tonight.

The NZ dollar was at US78.62c at 5pm, up from US78.25c at 8am but down from US79.15c at 5pm yesterday. It was at A73.57c at 5pm from A74.11c at 8am and A73.76c at 5pm yesterday.

"It has been a volatile session with sell-off in commodities through London and New York time, then the rebound in our session on exporter demand and stronger Reserve Bank of Australia (RBA) comments," said Murray Hindley, chief currency dealer at ANZ.

Economists today dubbed the RBA's quarterly statement on monetary policy as hawkish. The bank cited further tightening of the labour market and the likelihood of a significant pick-up in the mining sector as inflationary risks.

"They were strong comments out of the RBA and as the aussie went up 100 points we had to go up as well," Hindley said.

The RBA kept its cash rate at 4.75% at its May board meeting, after last raising it in November 2010.

The NZ dollar was at 0.5403 euro at 5pm from 0.5324 euro at the same time yesterday. The euro has been under pressure after the head of the European Central Bank suggested interest rates were unlikely to rise next month.

The NZ dollar was at 63.29 yen at 5pm from 63.59 at the same time yesterday, while the trade weighted index was at 67.54 from 67.46 yesterday.

NZPA

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