LONDON: The New Zealand dollar fell against its trans-Tasman counterpart after the Reserve Bank of Australia kept the target cash rate unchanged, while firming up its bias towards cutting rates if it’s needed.
The local currency dropped to 93.80 Australian cents at 5pm in Wellington from 94.27 cents immediately before the release, and from 94.92 cents yesterday. The kiwi rose to 67.39 US cents from 67.29 cents at 8am, and 67.81 cents yesterday.
The RBA kept the key rate at 2 percent, with governor Glenn Stevens saying low rates are needed with tepid inflation and spare capacity in the economy, with board members observing “that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand.”
Stevens said house price strength in Melbourne and Sydney was showing signs of abating, which had been a concern for the central bank in the past. Traders had priced in a 40 percent chance of a cut before the announcement as private lenders raised mortgage rates in recent weeks to protect their margins in the face of stricter capital requirements, which was seen as adding pressure to the RBA to lower the benchmark rate.
“As expected he made no cut, while maintaining a clear easing bias though – I don’t think they want to cut and I also think they’ll be happy the Sydney housing is starting to peel off too,” said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional in Auckland. “The Aussie’s had a bit of a bounce up and washed around, but it’s still a sell on rallies.”
