The New Zealand dollar weakened against the Australian dollar as improved business confidence and signs of a pickup in housing reduced the prospects of interest rates cuts across the Tasman.
The kiwi fell to 92.11 Australian cents at 5pm in Wellington, from 92.31 cents at the start of the day and down from 92.54 cents yesterday. The New Zealand dollar rose to 82.96 US cents from 82.62 cents at 8am and from 82.75 cents yesterday.
National Australia Bank's survey showed business confidence rose to +8 in January from +6 a month earlier, while its business conditions index rose to 4 from 3. Meantime, Australian government figures showed a 9.3 percent gain in house prices in the final quarter of 2013, while home loan approvals gained in December from a year earlier. Australia's central bank this month changed its easing bias to neutral, signalling an end to rate cuts this cycle.
"The Australian data was pretty strong," said Michael Johnston, senior trader at HiFX. "It made the market think there's little chance of any near term rate cut by the RBA and it has caused the Australian dollar to be squeezed up, dragging the kiwi along with it."
Investors are looking ahead to tonight when Federal Reserve chair Janet Yellen makes her first appearance before US lawmakers as head of America's central bank. Analysts are keen to hear her policy and economic views and expect she is likely to continue the Fed's plan to taper its US$65 billion a month quantitative easing programme by US$10 billion a month.
