NZ dollar falls to two-month low vs Aussie, spurred by rising iron ore prices
By Jonathan Underhill
July 20 (BusinessDesk) - The New Zealand dollar fell to a two-month low against a resurgent Australian dollar which reached a two-year high overnight as the price of iron ore rallied.
The kiwi was trading at 92.40 Australian cents as at 8:30am in Wellington from 92.77 cents late yesterday. The New Zealand dollar was little changed at 73.54 US cents from 73.52 cents.
Helping the Australian dollar rise to its highest level since May 2015 at 79.53 US cents were the minutes of the last Reserve Bank of Australia meeting showing policymakers had turned more upbeat on the economic outlook across the Tasman. While growth is steady in New Zealand, inflation evaporated in the second quarter, giving New Zealand's central bank little reason to hike interest rates soon. Rallying prices of Australia's raw material exports have helped the Aussie extend its gains.
The pace of gains in the Australian dollar has "accelerated to an unsustainable rate and a breather is needed ahead of 80.00 (US cents)," Imre Speizer, senior markets strategist at Westpac Banking Corp, said in a note. "Much of AUD/USD's gains have been driven by broad US dollar weakness. But there has also been a partial recovery in Australia's key commodity prices, after very steep declines in April and May. However, beyond multi-week gains, a firmly on hold RBA is likely to keep a lid on AUD/USD, easing to 0.74 by year-end."
Iron ore prices rose 2 percent overnight and have gained 32 percent since mid-June.
The Australian dollar's strength will get a test today with the release of labour market figures for June today, with expectations the Australian economy added 15,000 jobs last month, down from 42,000 in May, while the unemployment rate edged up to 5.6 percent. Traders said currencies have traded in relatively tight ranges in the past 24 hours ahead of policy statements from the European central bank and the Bank of Japan.
The trade-weighted index was little changed at 77.85 from 77.86 yesterday. The kiwi traded at 56.49 British pence from 56.42 pence and at 63.88 euro cents from 63.73 cents. The kiwi traded at 82.31 yen from 82.38 yen and was at 4.9661 yuan from 4.9680 yuan.