Kiwi loses ground against Aussie

NIKO KLOETEN
Last updated 13:28 23/07/2014

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The New Zealand dollar took a tumble against the Australian dollar overnight, falling to its lowest level in nearly six weeks.

The kiwi dropped more than half a cent from A92.7c to a low of A92.08c about 2am, before rebounding slightly to A92.3c at about midday.

The fall against the Aussie followed a speech by Reserve Bank of Australia Governor Glenn Stevens, in which he steered clear of trying to talk down the Australian dollar.

ANZ senior currency strategist Sam Tuck said the speech "didn't have anything interesting" but markets reacted anyway.

"There was a little bit of fear there would be something interesting and the lack of anything caused the Aussie dollar to rebound a bit," he said.

The kiwi had little movement against most other major currencies ahead of tomorrow's Reserve Bank of New Zealand official cash rate (OCR) announcement, where the central bank's governor Graeme Wheeler is tipped to raise the rate from 3.25 per cent to 3.5 per cent.

Tuck said there was some uncertainty about tomorrow's OCR decision but markets were still pricing in an OCR increase followed by a pause in rate hikes.

"If they held rates unchanged there would be a very decent move down in the dollar - it would be sitting at about US85c, which would mean a US1.5-1.75c drop," he said.

The dollar traded in a narrow band against the euro, between 64.24€c and 64.35€c, and between US86.52c and US86.71c against the greenback.

This continued a trend of low volatility this week, in contrast to last week when the kiwi slumped following a shock 8.9 per cent fall in dairy prices at the GlobalDairyTrade auction.

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