NZ dollar gains as traders eye rate cuts
By Paul McBeth
The New Zealand dollar gained as investors weighed up the prospects for rate cuts on both sides of the Tasman.
The Reserve Bank of New Zealand reviews the official cash rate on Thursday and minutes to Australia's last review were interpreted as having a more pronounced easing bias.
The kiwi gained to 65.90 US cents at 5pm in Wellington from 65.67 cents at 8am and 65.61 cents yesterday It advanced to 89.60 Australian cents from 89.12 cents.
Traders have priced in an outside chance New Zealand's Reserve Bank governor Graeme Wheeler will cut the official cash rate by 50 basis points on Thursday in response to a sagging dairy sector and low inflationary expectations.
Minutes to the RBA's July 7 meeting show the board expected more assistance to hits inflation target from a weaker Australian dollar and traders have priced in a 24 percent chance Australia's central bank will reduce rates next month.
"We saw a mild increase in the easing bias by the RBA and that encouraged traders to keep pressure on the Aussie dollar," said ANZ's Sam Tuck.
"The market sees the window of opportunity for the RBNZ to have an immediate impact on the New Zealand dollar as closing. You'd really need to see a 50 [basis point cut] to send the New Zealand dollar lower."
ANZ expects New Zealand's Reserve Bank will cut the OCR by 25 basis points to 3 percent on Thursday.
New Zealand net migration reached a new record in June, and is nearing the Treasury's topside forecast, which would fuel consumer spending and add pressure to the housing market, while short-term arrivals continued to rise.
RBNZ figures showed domestic spending on New Zealand credit cards slipped 0.1 percent in June, though total billings were up 6.5 percent on the year.
The local currency rose to 4.0921 Chinese yuan at 5pm in Wellington from 4.0760, climbed to 82 yen from 81.50 yen, increased to 60.93 euro cents from 60.60 cents and advanced to 42.43 British pence from 42.06 pence. The trade-weighted index rose to 70.22 from 69.37.