NZ dollar gains against Australian currency as RBA holds off hiking rates
By Paul McBeth
Aug. 2 (BusinessDesk) – The New Zealand jumped to a 12-month high against the Australian currency after the Reserve Bank of Australia kept its benchmark rate at 4.75%.
Governor Glenn Stevens said Australia’s central bank’s board considered “further policy tightening” but decided to keep the current rate given the “acute sense of uncertainty in global financial markets over recent weeks.” Future meetings will monitor Australia’s growth and inflation outlook.
The kiwi dollar climbed to 80.01 Australian cents from 79.63 cents immediately before the announcement.
Stevens said the central bank is still concerned about the medium-term outlook for inflation, which has been rising for the past six months.
The RBA’s decision to stay on hold comes as New Zealand’s central bank prepares to remove the 50 basis point cut it made in response to the Canterbury earthquakes as the local economy rebounds faster than expected.
Governor Alan Bollard last week said he sees “little need” for the emergency stimulus to stay in place, though any hikes after that will be limited by the very strong kiwi dollar.
The kiwi and Australian dollars are in uncharted territory against the greenback as sovereign debt crises in the U.S. and Europe make the South Pacific an attractive investment option. The kiwi recently traded at 87.87 U.S. cents and the Australian currency was recently at US$1.10.