The New Zealand dollar rose against the greenback after the central bank kept the official cash rate unchanged as expected and stuck to its view from last month's monetary policy statement, even after more benign inflation data.
The kiwi dollar rose to 79.05 US cents after the RBNZ statement, from 78.88 cents immediately before and from 78.31 cents at 5pm yesterday. The trade weighted index rose to 71.71 from 71.54 before the statement and from 71.26 yesterday.
Underlying annual inflation "is expected to settle near the mid-point of the target range over the medium term," Governor Alan Bollard said. The domestic economy is expected "to grow modestly over the next few years." Figures last week showed annual inflation fell to 1 per cent in the second quarter, at the bottom end of the bank's 1 per cent-to-3 per cent target range.
"The result was a slightly less dovish slant than we or the markets were expecting," said Dominick Stephens, chief economist at Westpac Ban "This statement is therefore slightly positive for the NZD and NZ swap yields. NZD/USD could extend last night's rally further to 0.7930 on this."
The kiwi dollar gained overnight from a slight improvement in risk appetite after European Central Bank council member Ewald Nowotny argued the region's rescue fund should get a banking license.
