NZ dollar rises vs Aussie as Australian economic growth misses expectations

Wednesday 6th December 2017

The New Zealand dollar rose against the Aussie dollar after figures showed the Australian economy grew at a slower-than-expected pace in the third quarter.

The kiwi traded at 90.93 Australian cents as at 5pm in Wellington from 90.21 cents late yesterday. It traded at 68.96 US cents versus 69.07 cents yesterday.

Australia's economy grew 0.6 percent in the third quarter and 2.8 percent on the year, government figures showed. Economists polled by Bloomberg had expected growth of 0.7 percent on quarter and 3 percent on the year. The data pointed to weakness in household spending, adding to the view the central bank will keep rates on hold for the foreseeable future. According to Reuters, interbank futures are not fully priced for a hike until early 2019. The Australian dollar sank on the disappointment, which benefited the kiwi against both the Aussie and the US dollar.

"A lot of people try to play the down-under trade - the kiwi/Aussie cross - but the cross can't absorb the flow so the kiwi-US also ends up moving up," said Martin Rudings, senior dealer foreign exchange at OMF in Wellington.

He said the overnight global dairy auction also helped support the New Zealand dollar given that whole milk powder price held up well. The GDT price index rose 0.4 percent in the latest GlobalDairyTrade auction, the first gain in five auctions, while whole milk powder climbed 1.7 percent

He said, however, the kiwi won't have far to run. "I don't think any rally is going to be sustained just at the moment." The focus remains firmly on the US tax reform as well as jobs data out of the US overnight Friday.

The trade-weighted index was at 72.83 from 72.62. The New Zealand dollar was at 51.32 British pence from 51.19 pence and rose to 58.22 euro cents from 58.05 cents. It was at 77.37 yen from 77.56 yen and 4.5617 yuan from 4.5579 yuan.

New Zealand's two-year swap rate fell 1 basis points to 2.14 while the 10-year swap rate fell 4 basis points to 3.07 percent.

(BusinessDesk)

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