The New Zealand dollar was little changed against its trans-Tasman counterpart after the Reserve Bank of Australia kept interest rates on hold, while saying weak wage growth is expected to keep inflation in check, even as the Australian currency depreciates.
The kiwi traded at 89.12 Australian cents at 5pm in Wellington from 89.09 cents immediately before the release, and down from 89.32 cents yesterday. The local currency traded at 77.96 US cents from 78.21 cents at 8am, up from 77.67 cents yesterday.
The RBA kept the target cash rate at 2.5 percent, as expected, and governor Glenn Stevens said inflation is expected to remain in the central bank's target range with wage growth likely to stay "relatively modest over the period ahead." Stevens again noted the strength in the Australian dollar, even though it has come off an earlier peak, and said economic growth will remain below trend and labour market data has been "unusually volatile" in recent months.
"The RBA is firmly on hold for a while yet. If commodity prices start to boom along, we'll see them hike rates," said Michael Johnston, senior trader at HiFX in Auckland. "The kiwi's pace of decline has slowed, which is to be expected, given how far it's fallen."
HiFX's Johnston said any bounces in the kiwi will probably be brief and shallow as it continues to grind lower in the coming weeks and months.
