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NZ dollar falls vs Aussie as Westpac rate hike puts RBA review in spotlight

Tuesday 4th September 2018

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The New Zealand dollar fell against its trans-Tasman counterpart ahead of today's Reserve Bank of Australia policy review which will attract close scrutiny after Westpac Banking Corp's out-of-cycle rate hike. 

The kiwi declined to 91.49 Australian cents as at 8am in Wellington from 91.81 cents yesterday. It was almost unchanged at 66.02 US cents from 66.05 cents yesterday with US markets closed for the Labor Day holiday. 

The RBA is expected to keep the target cash rate at 1.5 percent today after a slightly more upbeat assessment of the economy last month. Governor Philip Lowe's statement will be closely watched for any shift in tone, with Westpac's decision to raise its variable mortgage rate 14 basis points last week posing questions about whether the RBA can retain its neutral stance. New Zealand's Reserve Bank has indicated it doesn't plan to shift the official cash rate for the foreseeable future may raise or lower the benchmark rate. 

"Today’s RBA policy announcement is likely to maintain a decisively neutral tone, but the market will be interested if there is any response to the recent nudge up in mortgage rates from a number of banks," Bank of New Zealand senior markets strategist Jason Wong said in a note. The Aussie "has unwound some of Friday’s inexplicable underperformance and sits this morning just above 72 US cents, which sees NZD/AUD down to 0.9160."

No local data is scheduled today, although the Global Dairy Trade auction overnight is expected to post an increase in prices. 

The kiwi rose to 51.29 British pence from 51.07 pence yesterday after UK Prime Minister Theresa May's Brexit plan attracted criticism from European Union chief negotiator Michel Barnier and former UK foreign secretary Boris Johnson. The kiwi traded at 56.83 euro cents from 56.90 cents yesterday. 

The local currency edged up to 73.37 yen from 73.26 yen yesterday and fell to 4.5032 Chinese yuan from 4.5145 yuan. The trade-weighted index was at 71.59 from 71.66. 


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