The New Zealand dollar is little changed against its trans-Tasman counterpart after the Reserve Bank of Australia kept interest rates on hold and said it expects limited gains from a weaker Australian currency.
The kiwi traded at 93.60 Australian cents at 5pm in Wellington from 93.52 cents immediately before the release, and down from 93.75 cents on Monday.
The kiwi also traded at 86.72 US cents from 86.73 cents at 8am, up from 86.55 cents on Monday.
The RBA kept the target cash rate at 2.5 per cent, as expected, and kept its view that rates won’t change while the central bank supports the economy.
Governor Glenn Stevens said the Australian dollar was still high by historical standards, and that its decline over the past year won’t “assist in achieving balanced growth in the economy” as much as previously.
“For the time being they’re on the fence well and truly as they wait for the economy to stabilise before they potentially make a decision further down the line,” said Stuart Ive, senior client adviser at OMF in Wellington.
“The kiwi/Aussie cross is elevated, and has the potential to edge even higher if everything stays as it is. The risk is to the downside longer-term.”
The kiwi rose to a new six-and-a-half-year high of 89.67 yen in the course of the day, trading at 89.53 yen at 5pm in Wellington from 89.03 yen on Monday.
Mr Ive said New Zealand’s environment of rising interest rates was probably attracting investors seeking bigger returns, with the yield on 10-year government bonds at 4.62 per cent, compared to 0.63 per cent on the Japanese equivalent bond.
The kiwi was unchanged at 62.95 euro cents at 5pm in Wellington from Monday and the trade-weighted index edged up to 80.94 from 80.86.