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NZ dollar benefits from commodity currency gains after RBA decision, Canadian GDP

04 Mar 15

The New Zealand dollar rose along with other commodity currencies after the Australian Reserve Bank chose not to cut interest rates yesterday and following better-than-expected growth data in Canada.

The kiwi increased to 75.58 US cents at 8am in Wellington, from 75.26 cents at 5pm yesterday. The trade-weighted index gained to 78.52 from 78.28 yesterday.

The currencies of countries reliant on commodity exports advanced overnight after the RBA opted to leave its interest rate unchanged at a record low 2.25 percent, and a report showed Canada's economy grew at an annualised rate of 2.4 percent in the fourth quarter, beating the 2 percent expected. Meanwhile, average prices advanced 1.1 percent at the GlobalDairyTrade auction overnight, keeping Fonterra Cooperative Group's forecast payout to dairy farmers this season intact.

"Commodity currencies broadly rose overnight after the RBA left rates unchanged and Canadian fourth quarter GDP (gross domestic product) was stronger than expected, with positive revisions," ANZ Bank New Zealand agri economist Con Williams and senior FX strategist Sam Tuck said in a note. "The New Zealand dollar was dragged along for the ride."

Today, the focus will be on Australian fourth-quarter GDP data, which ANZ expects to be soft, putting the Aussie currency under pressure.

The New Zealand dollar will probably trade between 75.10 US cents and 75.90 cents today, ANZ said.

Locally, Auckland real estate agency Barfoot & Thompson is expected to publish its latest monthly housing report, while Statistics NZ releases the value of building work put in place in the fourth quarter.

The New Zealand dollar edged up to 96.42 Australian cents from 96.35 cents yesterday, advanced to 67.52 euro cents from 67.26 cents, gained to 49.15 British pence from 48.95 pence and increased to 90.36 yen from 90.11 yen.

Etsuro Honda, an economic adviser to Japanese Prime Minister Shinzo Abe, told the Wall Street Journal that the US dollar's strength against the yen may be at its upper limit, echoing comments from other officials expressing concern about yen weakness.

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