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Kiwi falls against Aussie on stronger-than-expected Australian house lending

Monday 9th September 2019

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The New Zealand dollar fell against the Australian dollar after better-than-expected housing finance data across the Tasman.

The kiwi was trading at 93.70 Australian cents at 5pm in Wellington compared to 93.89 cents at 7:45am and at 64.23 US cents from 64.22 cents. The trade-weighted index was unchanged at 71.42 points.

The Australian data for July showed that home loans rose 4.2 percent when consensus forecasts were for a 1.5 percent increase.

Investment lending jumped 4.7 percent compared with the 1.5 percent rise the market was expecting and the value of loans on owner-occupied properties leapt 5.3 percent compared with the expected 1 percent increase.

The lift came the same month the Australian Prudential Regulation Authority eased its guidance on how lenders should assess the ability of borrowers to meet their home loan obligations.

Peter Cavanaugh, the senior client advisor at Bancorp Treasury Services, says the data came on top of Core Logic data showing house prices rose 0.8 percent in August, thanks to sharp increases in Sydney and Melbourne, two cities in which house prices had fallen the most.

“That was no surprise because APRA eased loan serviceability requirements last month so we’ve suddenly got a non-interest-rate lift,” Cavanaugh says.

That’s helped to take the pressure off the Reserve Bank of Australia to cut interest rates again, which in turn helped boost interest in the Australian dollar.

The RBA cut its cash rate on June 5 and July 3 by 25 basis points each time down to 1 percent.

New Zealand’s Reserve Bank cut its cash rate by 50 basis points to 1 percent in early August and economists expect it to cut again in November.

The New Zealand dollar was trading at 52.34 British pence from 52.32, at 58.26 euro cents from 58.23, at 68.68 yen from 68.61 and at 4.5769 Chinese yuan from 4.5680.

The two-year swap rate edged down to a bid price of 0.9425 percent from 0.9473 on Friday. Ten-year swaps eased to 1.2500 percent from 1.2975.

(BusinessDesk)

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