Kiwi takes on Aussie dollar

Last updated 09:06 19/07/2013

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The New Zealand dollar is continuing to trade at highs against the Australian currency not seen for nearly five years, with no pull-back in sight.

The kiwi was trading at A86.08 cents at 8am, but reached A86.23c overnight after hitting A86.30c at the end of last week.

These elevated levels, which come on the back of a drop in Australian business confidence, have not been reached since the end of 2008.

OM Financial senior foreign exchange advisor Stuart Ive said Australian consumer confidence index data released yesterday, showing a fall from two in the first quarter to minus-one in the second quarter, added to the expectation the Reserve Bank of Australia would cut interest rates from 2.75 per cent.

While New Zealand's ANZ-Roy Morgan confidence survey out yesterday showed a slight dip in confidence here, the New Zealand central bank was expected to raise interest rates from 2.5 per cent as the economy gained momentum, he said.

While the news was great for New Zealanders crossing the ditch for a holiday, exporters would not be welcoming the elevated exchange rate.

And the kiwi was likely to push higher still, Ive said.

If the Australian central bank did decide to cut rates, and the Reserve Bank of New Zealand (RBNZ) signalled a rate rise in the first quarter of next year, the New Zealand dollar would be pushing towards the A94c mark, not seen since August 2008, he said.

The kiwi was expected to trade between A86c and A86.60c today, he added.

The kiwi also performed well against the greenback in the past 24 hours as markets watch the Federal Reserve chairman's every move for an indication of when the US will start to taper its $85 billion-a-month ($107b) bond-buying programme.

The kiwi was trading at US79c at 8am.

"The kiwi held its own against the US dollar," Ive said.

New Zealand credit card spending and migration data was unlikely to move markets today, Ive said. Attention would be on the Japanese upper-house election on Sunday and next week's RBNZ official cash rate announcement, he said.

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