NZ dollar dips vs. Australian dollar as RBA notes spending surge in resources sector
By Paul McBeth
Sept 4 (BusinessDesk) - The New Zealand dollar dipped against its Australian counterpart after the Reserve Bank of Australia kept interest rates on hold, and said capital spending in the resources sector is keeping the economy growing.
The kiwi fell to 77.65 Australian cents at 5pm in Wellington from 77.80 cents at 8am and 77.98 cents yesterday. It fell to 79.74 US cents from 80.14 cents yesterday.
RBA Governor Glenn Stevens kept the target cash rate at 3.5 percent, as expected, saying inflation is consistent with the bank's target and growth is on trend, even amid "a more subdued international outlook than was the case a few months ago." Stevens said growth was underpinned by "very large increases in capital spending in the resources sector," an area that's come under pressure amid falling iron ore prices as Chinese manufacturers scale back their demand.
"The markets had picked up on commodity prices falling, but the RBA has known about that for some time," said Chris Tennent-Brown, FX economist at Commonwealth Bank in Sydney. "Both the Aussie and kiwi should probably pick up a little bit in the London market this afternoon, and if we get a good dairy auction tonight it might help the kiwi along."
The RBA review comes ahead of tomorrow's Australian second-quarter gross domestic product, which is expected to show the so-called growth continued in the period. CBA expects quarterly growth of 0.8 percent, taking the annual expansion to just below 4 percent.
"That's pretty good growth in anyone's book," Tennent-Brown said.
Fonterra Cooperative Group will hold its fortnightly auction dairy auction in the US on Tuesday after ANZ Bank's commodity price index showed local prices for raw materials rose 0.5 percent last month, snapping a seven-month decline.
That comes ahead of Thursday's European Central Bank meeting, where President Mario Draghi is expected to announce a bond-buying programme for distressed government debt.
The kiwi dollar fell to a new two-month low 63.22 euro cents from 63.69 cents yesterday, and declined to 50.18 pence from 50.48 pence. It dropped to 62.47 yen from 62.79 yen yesterday, and decreased to 71.67 on a trade-weighted basis from 72.05 late yesterday.