NZ dollar falls vs Aussie as Australian GDP growth not as bad as feared

Wednesday 7th June 2017

The New Zealand dollar fell against the Australian dollar when gross domestic product data across the Tasman wasn't as weak as some analysts had been expecting, dashing chances of an immediate run at parity.

The kiwi fell to 95.08 Australian cents as at 5pm in Wellington versus 95.67 Australian cents as at 8am and from 95.53 cents late yesterday. It was trading at 71.69 US cents as at 5pm in Wellington versus 71.56 cents late yesterday.

The kiwi had gained 5.5 percent against the Aussie from its low in mid-March, prompting some strategists to ponder whether the kiwi has a chance of reaching parity with its Australian counterpart. However “our parity party is looking a bit forlorn this afternoon,” said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank. Part of the move is because a large section of the market was picking the kiwi to appreciate ahead of the data and given the sharp gain over recent weeks some pullback was to be expected, he said

Australia’s GDP expanded 0.3 percent in the three months through March from the fourth quarter of 2016 and grew 1.7 percent from a year ago, data from the Australian Bureau of Statistics showed Wednesday. While economists polled by The Wall Street Journal had expected 0.3 percent growth on quarter some had expected the GDP to dip into negative territory.

ASB's Kelleher said positive growth meant “Australia may have dodged a bullet on this one” but that “it doesn't take anything out of play” in terms of parity. The number is still weak and iron ore prices remain under pressure, he said. "I haven't changed my opinion, we still look a lot better from a distance than they do."

Traders, like Kelleher, who say parity is on the cards, have said it won't happen overnight. Bank of New Zealand currency strategy Jason Wong has tipped parity by early 2019.

Looking ahead, Kelleher said the focus is now firmly on the UK election result. The European Central Bank meeting and former Federal Bureau of Investigation director James Comey's congressional testimony will also garner interest.

The trade-weighted index rose to 77.03 from 76.98 yesterday. The kiwi was at 63.65 euro cents from 63.53 cents yesterday and rose to 55.59 British pence from 55.37 pence. The kiwi traded at 78.57 yen from 78.66 yen yesterday and increased to 4.8699 Chinese yuan from 4.8656 yuan.

New Zealand's two-year swap rate was unchanged at 2.18 percent and the 10-year swap fell 2 basis points to 3.13 percent.

(BusinessDesk)

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