The New Zealand dollar held its gains against the Australian dollar, which was sold yesterday on disappointment the Reserve Bank of Australia didn't take its cue from other central banks who have turned hawkish, preferring to reiterate its preference to keep policy in a neutral setting.
The kiwi rose to 95.62 Australian cents as at 5pm in Wellington from 95.31 cents late yesterday. The local currency traded at 72.83 US cents from 72.70 cents yesterday with the July 4 Independence Day holiday in the US keeping markets across Asia relatively quiet.
The Australian dollar fell after RBA governor Philip Lowe said that his board "judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time". Some traders had expected he would take a lead from colleagues at central banks in Canada, England, Europe and even from Sweden's Riksbank in talking up the prospects of interest rate increases. The change in tone leaves the RBA and New Zealand's central bank more defiantly neutral than many of the peers.
"The Aussie is still suffering from the RBA yesterday and the kiwi-Aussie cross has rallied quite hard," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank. "The market has surmised that maybe the RBA would change its tune so the reaction has been to sell the currency."
The week may be about to heat up, with heavy releases of economic data scheduled for Thursday and Friday and key leaders set to meet at the G-20 meeting at the weekend, Kelleher said. The minutes of the last Federal Reserve policy meeting are released on Wednesday in the US and Thursday brings Australian trade for May, US ADP payrolls for June, the US May trade balance and the US June non-manufacturing ISM survey. The European Central Bank's June meeting minutes are also released on Thursday. Friday brings the key non-farm payrolls data for June in the US.
