NZ dollar extends slide vs. Aussie as iron ore rebound

NZ dollar extends slide vs. Aussie as iron ore rebound lifts sentiment

By Jonathan Underhill

April 28 (BusinessDesk) - The New Zealand dollar extended its slide against the Australian dollar, which has been helped by a recovery in the price of iron ore, Australia's biggest export commodity, to almost US$60 a tonne.

The New Zealand dollar fell to 96.79 Australian cents from 97.35 cents yesterday. It traded at 76.19 US cents from 76.12 cents late yesterday.

The kiwi initially fell against its Australian counterpart after a wire agency wrongly attributed to Reserve Bank of Australia governor Glenn Stevens comments that the jobless rate across the Tasman was improving. The comment, later corrected, was from the Q&A session at the end of a speech Stevens gave to a banking summit in Sydney, where he declined to comment on monetary policy. Meanwhile, iron ore traded at US$59.09 a tonne yesterday, according to the Metal Bulletin, bringing its surge from a 10-year low this month to more than 25 percent.

"If you were running a fair-value model of the Aussie versus the kiwi, the speed of the increase in iron ore in the past couple of weeks has been impressive," said Robert Rennie, chief currency strategist at Westpac Banking Corp. "Am I expecting a wee bit more upside in the Aussie versus the kiwi in the short term? Yes."

Yesterday's gains in iron ore weren't followed through today, though the Dalian iron ore market "very quiet," suggesting there has been a bit of a squeeze in spot prices, he said.

Traders see a 52 percent chance that the Reserve Bank of Australia will cut interest rates at its policy meeting next week, based on the overnight interest swap curve. By contrast, there is little prospect that the Reserve Bank will move the official cash rate from 3.5 percent this Thursday. Governor Graeme Wheeler may, however, drop last month's reference to the next move in interest rates being either up or down, after assistant governor John McDermott gave a speech saying the bank isn’t considering any increase in rates.

The trade-weighted index rose to 78.98 from 78.75 last Friday, before the three-day Anzac weekend.

The local currency was little changed at 70.08 euro cents from 70.11 cents yesterday. The kiwi rose to 90.77 yen from 90.62 yen yesterday and slipped to 50.03 British pence from 50.14 pence.

(BusinessDesk)

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