NZ dollar falls vs. Australian dollar; RBA keeps rate steady

By Paul McBeth

Nov. 6 (BusinessDesk) - The New Zealand dollar fell against its Australian counterpart after the Reserve Bank of Australia kept interest rates on hold as inflationary pressures start to emerge across the Tasman.

The kiwi dollar fell to 79.21 Australian cents at 5pm in Wellington from 79.53 cents immediately before the RBA announcement and 79.65 cents yesterday. It rose to 82.62 US cents at 5pm from 82.44 cents at 8am and 82.51 cents yesterday.

The RBA kept the target cash rate at 3.25 percent, dashing expectations of a quarter-point cut in a Reuters survey of economists. RBA governor Glenn Stevens said "recent outcomes on inflation were slightly higher than expected" and the new carbon tax is expected to lead to higher consumer prices.

A soft labour market containing wage pressures and "some continuing improvement in productivity performance will be needed to keep inflation low," he said. The Australian dollar climbed to US$1.0424 at 5pm in Wellington from US$1.0367 immediately before the announcement.

The statement "didn't give a strong impression one (a rate cut) was imminent" which surprised the majority of the market, said Imre Speizer, market strategist at Westpac Banking Corp in Auckland. If the RBA doesn't cut the rate next month, "the Aussie's going to outperform the kiwi for sure."

New Zealand's first tranche of September quarter employment figures were in line with expectations today, with the labour cost index showing quarterly private sector wage inflation of 0.5 percent, while the quarterly employment survey reported a 0.3 percent pick-up in total filled jobs on the strength of more part-timers.

Investors are gearing up for the US to hit the polls on Tuesday, with the Presidential race between incumbent Democrat Barack Obama and Republican contender Mitt Romney finely balanced. President Obama pulled ahead of Romney in an Oct. 31 – Nov. 3 national poll conducted by the Pew Research Center, favoured by 48 percent versus 45 percent, compared with a deadlock of 47 percent a week ago.

The kiwi rose to 64.57 euro cents from 64.34 cents yesterday and rose to 51.69 British pence from 51.48 pence. The currency fell to 66.19 yen from 66.43 yen, and the trade-weighted index was at 73.92 from 73.95.

(BusinessDesk)

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