By ELLEN READ
Ripples from an Australian interest rates decision due today will be felt on this side of the Tasman.
The local currency will take a hit against that of its major trading partner if the Reserve Bank of Australia holds rates at 4.75 per cent - as now expected by the market - rather than lowering them. At 5pm yesterday, the kiwi was buying 87.52Ac.
Although New Zealand's 5.25 per cent official cash rate gives the kiwi a yield advantage, the Reserve Bank of New Zealand is in an easing phase, so news that the RBA did not feel the need to follow suit would strengthen the aussie.
Conversely, a cut would "almost certainly see kiwi/aussie move back up to the recent highs," Westpac senior currency strategist Johnathan Bayley said.
He said the market was trading faithfully on a yield basis, reacting quickly to price in interest rate moves or indications. Against the United States dollar, the kiwi has sat in a 57-58.9USc range for almost two months as the greenback paused for breath during its depreciation cycle. But disappointing US manufacturing data this week has dented sentiment, meaning the kiwi - and other dollar bloc currencies - are set to make new gains. Some dealers predicted the kiwi would break through 59USc overnight.
Despite this week's greenback dip, the US dollar has consolidated, due mainly to guarded optimism about US growth.
Bank report likely to create ripples
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