NZ dollar gains vs. Australian dollar on gloomy capex outlook across the Tasman

Thursday 25th February 2016

The New Zealand dollar gained against its trans-Tasman counterpart after figures painted a gloomy outlook for capital spending in Australia, adding to signs of sluggish growth in its economy.

The kiwi rose to 92.68 Australian cents at 5pm in Wellington from 92.48 cents immediately before the release, and 92.16 cents yesterday. The local currency increased to 66.46 US cents from 66.42 cents at 8am and 66.17 cents yesterday.

Australia's currency fell after Bureau of Statistics figures showed overall investment rose 0.8 percent in the December quarter, snapping four quarters of declining capex, while estimating an 18 percent drop in planned expenditure for 2015/16. The slowdown in Australia's resources boom has wound back spending intentions, and the nation's policymakers have been getting to grips with the need to diversify the economy.

"The Aussie private capex headline number looked okay," but the estimates "caused the Aussie to come off," said Mike Johnston, senior dealer at HiFX in Auckland.

The trans-Tasman currencies got a boost in the Northern Hemisphere trading session as oil prices bounced from their lows, and HiFX's Johnston said the waxing and waning of risk sentiment will continue to drive the local currency.

New Zealand government figures today showed annual inbound net migration reached a new record in January while short-term visitor arrivals stayed strong.

HiFX's Johnston said the kiwi will stay under pressure on the expectation the Reserve Bank will cut the 2.5 percent official cash rate this year.

New Zealand's two-year swap rate was unchanged at 2.41 percent, and 10-year swaps fell two basis points to 3.07 percent, a new record low.

The kiwi rose to 74.65 yen from 74.04 yen yesterday, and increased to 4.3420 Chinese yuan from 4.3206 yuan. It advanced to 60.29 euro cents from 60.05 cents yesterday, and climbed to 47.68 British pence from 47.30 pence. The trade-weighted index gained to 72.38 from 72.06 yesterday.

BusinessDesk.co.nz

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