NZ dollar heads for 1.1% weekly drop vs. Aust dollar
NZ dollar heads for 1.1% weekly drop vs. Aust dollar as trans-Tasman fortunes reverse
By Paul McBeth
March 15 (BusinessDesk) - The kiwi dollar is heading for a 1.1 percent weekly decline against its Australian counterpart as the fortunes of the neighbouring countries trade places with the gloomy pall lifting from Australia and settling over New Zealand.
The local currency rose to 79.12 Australian cents at 5pm in Wellington from 78.84 cents yesterday, clawing back some of yesterday's sell-off after better-than expected jobs data across the Tasman. The kiwi fell to 82.05 US cents from 82.14 cents at 8am and was up from 81.78 cents yesterday.
New Zealand's economy has been hit with a drought being declared across the North Island, which will sap agricultural production, while at the same time the Reserve Bank has threatened to cut interest rates if the currency gains for no real reason. In Australia, the central bank has moved away from more rate cuts, and a strong jobs report was the latest in a series of better economic data.
The gap between New Zealand and Australian 10-year government bonds has narrowed in the past week as the economic fortunes of the countries turnaround. The yield on the New Zealand bond traded at 3.81 percent at 5pm in Wellington, 18 basis points above its Australian counterpart, down from the 29 basis points advantage on March 7.
Two things weighing on the local economy are" the drought and then the Reserve Bank yesterday saying the high kiwi is a problem and he could cut rates on it," said Imre Speizer, market strategist at Westpac Banking in Auckland. "I think the kiwi will still go up over the year the year, but it needs fresh evidence - for now it's still unwinding."
The kiwi rose to 78.83 yen from 78.38 yen yesterday after Haruhiko Kuroda was confirmed as the next governor of the Bank of Japan. Kuroda has said he will extend the bank's easing policy and plans to get inflation to 2 percent within two years.
The local currency traded at 63.05 euro cents from 63.11 cents yesterday, and fell to 54.34 British pence from 54.72 pence.
The trade-weighted index rose to 75.50 from 75.33.