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NZ dollar climbs above 90 Aust cts as RBA keeps rates steady

NZ dollar climbs above 90 Aust cts as RBA keeps rates on hold

By Paul McBeth

Dec. 3 (BusinessDesk) - The New Zealand dollar rose above 90 Australian cents after the Reserve Bank of Australia kept its key rate unchanged, while complaining about its own over-valued currency, adding to the view that the local economy is faring better than across the Tasman.

The kiwi rose to 90.01 Australian cents at 5pm in Wellington from 89.89 cents immediately before the release, and 89.56 cents yesterday. The local currency slipped to 81.79 US cents at 5pm from 81.71 cents at 8am and 81.94 cents yesterday.

The RBA kept the target cash rate on hold at 2.5 percent and will continue to tweak policy “to foster sustainable growth in demand and inflation outcomes consistent with the target,” governor Glenn Stevens said in a statement. Stevens said the Australian dollar was still “uncomfortably high” and needed to fall to support balanced growth in the economy.

The review comes after figures yesterday showed New Zealand terms of trade at a 40-year high on the rapid appreciation in dairy prices, gains in forestry and meat prices, and adds to the view that interest rates will increase on this side of the Tasman ahead of Australia. New Zealand’s Reserve Bank will hold its final monetary policy review next week.

“The big question is will the RBA cut rates any more, and for New Zealand, when will they start hiking?” said Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney. “I thought the RBNZ would need to be closer to hiking, but it’s got up to 90 Australian cents and above.”

CBA’s Tennent-Brown said the 40-year high in the terms of trade almost justified the New Zealand dollar at its current levels, with prices for key commodities such as dairy, forestry and meat underpinning those gains.

The local currency gained to 84.37 yen at 5pm in Wellington from 83.87 yen yesterday, and increased to 60.40 euro cents from 60.24 cents. It was little changed at 49.97 British pence from 49.90 pence yesterday. The trade-weighted index increased to 77.10 from 76.93 yesterday.

(BusinessDesk)


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