NZ dollar gains vs. Australian dollar as weak building consents add to resources fears
By Paul McBeth
Aug. 30 (BusinessDesk) - The New Zealand dollar gained against its Australian counterpart as new building approvals across the Tasman sank, adding to fears the mining boom may be coming to an end.
The kiwi rose to 77.58 Australian cents at 5pm in Wellington from 77.24 cents at 8am and was little changed from 77.59 cents yesterday. It traded at 80.13 US cents from 80.01 cents at 8am and down from 80.42 cents yesterday.
Australia's currency came under pressure after falling iron ore prices and a slowing Chinese economy sparked fears the so-called 'Lucky Country' may be coming to the end of its resources boom. Government figures showing building approvals dropped a bigger-than-expected 17 percent in July from a month earlier added to the downbeat tone, while a 3.4 percent increase in new private capital expenditure failed to spur confidence in Australia. The Australian dollar sank 0.6 percent to US$1.0323.
"The market seems to be hanging on to anything that sounds like the boom is over when the truth is that it's far from it and the data says so," said Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney. "The kiwi should outperform the Aussie as the market continues to price in more interest rate cuts from Australia," he said, referring to the trans-Tasman currencies colloquially.
The Reserve Bank of Australia reviews monetary policy next week, and is expected to keep the target cash rate at 3.5 percent.
Tennent-Brown said the kiwi may head towards 80 Australian cents if the RBA decides to cut rates later this year, but won't head back to a more historical average around 85 cents while Australia keeps its interest rate advantage.
The trans-Tasman currencies fell in Northern Hemisphere trading yesterday after the Federal Reserve's regional Beige Book gave an upbeat assessment of US home sales and retail, eroding expectations the central bank will print money for a third time.
Traders are waiting for the central bankers' summit in Jackson Hole, Wyoming, which kicks off on Friday with a keynote address by Fed chairman Ben Bernanke. Official Chinese manufacturing figures on Saturday will also get attention from investors.
The trade-weighted index fell to 72.05 from 72.26 yesterday, and the kiwi declined to 63 yen from 63.20 yen. The New Zealand dollar decreased to 63.93 euro cents from 64.03 cents and dropped to 50.64 British pence from 50.86 pence.