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NZ dollar follows Aussie higher as upbeat Australian data stokes antipodean demand

Thursday 3rd March 2016

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The New Zealand dollar followed its trans-Tasman counterpart higher as better than expected Australian trade figures followed on yesterday's upbeat data, and fuelled demand for the two currencies. 

The kiwi rose to 66.76 US cents at 5pm in Wellington from 66.42 cents at 8am and 66.24 cents yesterday. The Australian dollar climbed to 72.99 US cents from 72.23 cents yesterday, and the kiwi fell to 91.40 Australian cents from 91.69 cents yesterday. 

Australia's trade deficit was smaller than expected in January at A$2.9 billion, following from yesterday's gross domestic product report showing annual growth of 3 percent in 2015. That scaled back bets on the Reserve Bank of Australia cutting its target cash rate to new record lows, boosting demand for the Australian dollar, which spilled over to the kiwi. 

"The kiwi got a lift on the back of the Aussie data - we had the GDP figure yesterday, which was better than expected, and that trade has continued," said Grant Bodle, senior FX dealer at HiFX in Auckland. "The kiwi has piggy-backed on the Aussie data." 

Still, upcoming US labour market data is expected to show the world's biggest economy is still in good health, keeping alive the prospects for the Federal Reserve to raise interest rates again this month. 

HiFX's Bodle said that will underpin "broad US dollar strength" and the rally in the kiwi is likely to be short-lived. 

New Zealand government data today showed building activity expanded 2.8 percent in the December quarter to a record level, supported by Auckland's need for new housing and the switch in focus to commercial work in Canterbury. Separately, the ANZ commodity price index showed higher prices for locally produced raw materials in February, as more expensive beef and aluminium offset recent declines in dairy. 

The two-year swap rate was unchanged at 2.41 percent, and 10-year swaps rose three basis points to 3.13 percent. 

The local currency gained to 4.3685 Chinese yuan from 4.3394 yuan yesterday, and rose to 76.07 yen from 75.42 yen. It increased to 61.67 euro cents from 60.99 cents yesterday, and was little changed at 47.40 British pence from 47.48 pence. The trade-weighted index advanced to 72.40 from 72.12 yesterday.

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