Sharechat Logo

NZ dollar may rise against Australian dollar on RBA governor's speech

Tuesday 30th July 2013

Text too small?

The New Zealand dollar may extend this year's 10 percent gain against the Australian dollar should Reserve Bank of Australia governor Glenn Stevens today affirm that a slowing economy justifies further interest rate cuts.

The kiwi recently traded at 87.20 Australian cents, little changed from 87.27 cents at the 5pm market close in Wellington yesterday. The local currency weakened to 80.31 US cents, from 80.78 cents yesterday.

The New Zealand dollar has surged against its Australian counterpart this year, hitting a four-and-a-half year high of 87.74 cents last week, as traders expect governor Stevens to continue cutting interest rates to spur the economy as mining slows. Meanwhile in New Zealand, a reviving local economy is expected to push interest rates up.

"I wouldn't be surprised at all if he endorses the current market pricing," said Sam Tuck, senior manager FX at ANZ New Zealand. "Kiwi/Aussie might be supported higher."

Should the New Zealand dollar appreciate further against the Aussie, it would be an opportunity to buy Australian dollars as divergent interest rate paths are already priced in, said Tuck.

Traders are pricing in a 79 percent chance of an interest rate cut at the next Reserve Bank of Australia meeting on Aug. 6, according to the Overnight Index Swap Curve. Australia's benchmark rate is currently 2.75 percent.

Traders see a zero chance that interest rates will change at the next Reserve Bank of New Zealand meeting on Sept. 12, however they are pricing in a 61 percent chance of a hike in the next year, according to the Overnight Swap Curve. New Zealand's rate is currently 2.5 percent.

Last year, the Australian governor's annual speech to the Anika Foundation was titled "the lucky country" and the market would react more should he continue to be optimistic in the same vein this year, said ANZ's Tuck. Today's speech in Sydney is expected at about 3pm local time.

In New Zealand today, the statistics department publishes the latest data on building consents.

The local currency weakened to 60.49 euro cents from 60.83 yesterday and dipped to 52.25 British pence from 52.51 pence. The kiwi fell to 78.52 yen from 79.02 yen and the trade-weighted index slipped to 75.55 from 75.93.

BusinessDesk.co.nz



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

SML - Synlait Milk Limited - Trading Halt of Securities
AIA - Auckland Airport announces board chair changes
AIA - Auckland Airport announces board chair changes
CEN - Tauhara commissioning progress update
FPH initiates voluntary limited recall
March 28th Morning Report
KFL Celebrates 20 Years of Excellence in Investment Mgmt.
SVR - Savor FY24 Earnings Guidance & Change in Banking Partner
NZK - NZ King Salmon Investments Limited FY24 Results
March 27th Morning Report