Kiwi falls as Oz holds interest rates

The kiwi dollar dipped against its transtasman counterpart after the Reserve Bank of Australia kept interest rates on hold.

The kiwi traded at 90.98 Australian cents from 91.16 cents on Monday. It traded at US67.26 cents from US67.36c on Monday.

The RBA kept the target cash rate at 1.5 per cent as forecast by all 29 economists polled by Bloomberg. Interest rates have now been on hold in Australia for two years. In a statement accompanying the decision, RBA governor Philip Lowe said its “central forecast for the Australian economy remains unchanged” with growth expected to average a bit above 3 per cent in 2018 and 2019.

While Lowe said “one-off declines in some administered prices in the September quarter are expected to result in headline inflation in 2018 being a little lower than earlier expected,” the RBA still expects inflation to be higher in 2019 and 2020 than it is currently. Investors will now be waiting for a rate decision and statement from New Zealand’s central bank tomorrow. The Reserve Bank is expected to keep the official cash rate at a 1.75 per cent but its forecasts on growth, inflation and interest rates will be watched.

The kiwi increased to 4.6106 Chinese yuan from 4.5998 yuan and traded at 74.90 yen from 75.02 yen. It was little changed at 58.21 euro cents from 58.31 cents and edged up to 51.97 British pence from 51.86 pence. The trade-weighted index was at 72.62 from 72.66.

New Zealand’s two-year swap rate was down 1 basis points at 2.09, while 10-year swaps decreased 2 basis point to 2.99 per cent.