The New Zealand dollar was little changed against its Australian counterpart ahead of the Reserve Bank of Australia's meeting today amid expectations Australia may cut interest rates.
The kiwi traded at 93.44 Australian cents at 8am in Wellington, from 93.40 cents at 5pm yesterday. The local currency advanced to 73.11 US cents from 72.63 cents yesterday as commodity currencies gained following higher oil prices.
Traders are sitting on their hands as they await the main event in the Australasian day, the Reserve Bank of Australia's decision on interest rates scheduled for release at 4:30pm New Zealand time. Weaker global inflation, driven by lower oil prices, has prompted many central banks around the world to reduce interest rates. Last week, New Zealand's central bank removed its tightening bias and opened the door to possible rate cuts, and in Australia traders are currently pricing in a 62 per cent chance of a cut today, according to the Overnight Index Swap curve.
"All eyes will be on the Reserve Bank of Australia, as it answers the question of whether it will cut rates at its first meeting for the year," ANZ Bank New Zealand senior economist Sharon Zollner said in a note. "We think there's a decent chance of a cut but on balance expect the RBA board to hold off and flag a rate cut for next month. Either way, monetary policy will be eased."
The New Zealand dollar would probably spike briefly higher should the RBA cut rates, provided it also signals a further easing bias, Zollner said..
