Tuesday 19th February 2013
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The New Zealand dollar traded near a 2 ½ year high against its Australian counterpart before minutes of the Reserve Bank of Australia's last policy meeting that may hint at further easing across the Tasman.
The kiwi traded at 82.05 Australian cents, little changed from 5 pm in Wellington yesterday, having reached as high as 82.33 cents at the end of last week. The local currency rose to 84.51 US cents from 84.40 cents in the absence of US traders taking the President's Day holiday.
The RBA held its cash rate unchanged at 3 percent at is last review on Feb. 6, having lowered the benchmark rate to the lowest level since the wake of the global financial crisis in a series of cuts starting in late 2011. Traders expect 33 basis points of cuts over the next 12 months based on the overnight interest swap curve, which would narrow the gap with New Zealand's 2.5 percent official cash rate.
"If these serve to increase market expectations for future RBA easing, this would likely push the NZD/AUD higher," said Kymberly Martin, market strategist at Bank of New Zealand, in her morning note.
"Over the medium-term we continue to see steady upside to NZD/AUD, as the RBA likely cuts further than currently priced by the market, and the RBNZ begins to steadily withdraw monetary stimulus," she said.
The New Zealand dollar traded at 63.29 euro cents from 63.32 cents late yesterday after European Central Bank President Mario Draghi warned of "further weakness" in the region's economy.
Data released last week showed that the EU economy contracted more than expected in the fourth quarter, shrinking 0.6 percent from the previous three months.
The kiwi traded little changed at 79.42 yen and rose to 54.64 British pence from 54.53 pence.
The trade-weighted index was at 76.96 from 76.93 yesterday.
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