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Dollar rises to four-week high vs Ausi as RBA keeps rates unchanged

Wednesday 3rd February 2010

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The New Zealand dollar climbed to near a month-high against its Australian counterpart after the Reserve Bank of Australia unexpectedly held its cash rate at 3.75% yesterday.  

RBA Governor Glenn Stevens said a pause was necessary after lenders had hiked interest rates more than the cash rate, and more time was needed to assess the impact. The kiwi jumped above 80 Australian cents for the first time in four weeks as traders bet New Zealand’s central bank will hike interest rates 180 basis points in the coming 12 months compared to only 85 basis points in Australia. The New Zealand currency gained against the greenback as risk appetite returned after concerns about Greece’s fiscal woes eased.  

“People are a lot less sure of future RBA hikes,” said Mike Jones, strategist at Bank of New Zealand. “We could see the kiwi/Aussie cross head higher over the next few weeks,” he said, referring to the trans-Tasman currencies colloquially.  

The kiwi jumped to 71.16 U.S. cents from 70.66 cents yesterday, and advanced to 65.52 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 65.25. It gained to 64.30 yen from 64.02 yen yesterday, and was little changed at 80.35 Australian cents from 80.30 cents. It increased to 50.93 euro cents from 50.76 cents yesterday, and rose to 44.53 pence from 44.38 pence.  

Jones said the currency may trade between 70.40 U.S. cents and 71.70 cents today amid a more upbeat assessment of the global outlook.  Investors’ fears about Greece eased ahead of the European Union’s recommendations to help pull the nation out of its fiscal difficulties.

The price of raw materials rose, with the Reuters Jefferies CRB Futures Index, a broad measure of 19 commodity prices, rose 1.9%, helping underpin gains in the so-called commodity currencies.

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