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NZ dollar gains vs. Australian dollar on RBA rate view, as dairy auction, Fed awaited

18 Mar 2015

The New Zealand dollar gained against the Australian dollar after minutes of the last Australian central bank meeting showed it considered cutting interest rates. Traders are now awaiting results of the dairy auction overnight.

The kiwi touched 96.82 Australian cents, the highest since March 5, and was at 96.71 cents at 5pm in Wellington, from 96.27 cents at 5pm yesterday. The New Zealand dollar rose to 73.79 US cents from 73.61 cents yesterday ahead of the US Federal Reserve's statement due Thursday morning New Zealand time.

Minutes of the Reserve Bank of Australia's March 3 board meeting show members deemed a further cut in interest rates could be needed to support an economy growing at a below-trend pace. The bank kept its cash rate unchanged at a record low 2.25 percent and according to the minutes, "members were of the view that a case to ease monetary policy further might emerge". By contrast, the Reserve Bank of New Zealand says the next move in rates could be up or down.

"The minutes were a bit more dovish than anticipated," said Stuart Ive, senior dealer at OMF. The kiwi-Australian cross rate "is continuing to edge higher, but looking forward to the milk auction."

Price rose in the last GlobalDairyTrade auction two weeks ago, with the GDT winning price rising 1.1 percent. But the results by product were mixed, with gains in butter and casein prices, offsetting a decline in whole milk powder, anhydrous milk fat and rennet casein. Whole milk powder fell 1 percent after strong gains in the previous two auctions.

The New Zealand dollar traded at 69.84 euro cents, down from a record 70.13 cents overnight and from 69.96 cents yesterday. The European Central Bank said it settled 9.751 billion euros of public-sector bond purchases in the first week of a programme to pump more than 1 trillion euros into the Eurozone economy.

The local currency edged lower to 49.76 British pence from 49.87 pence yesterday. The kiwi advanced to 89.50 yen from 89.33 yen. The trade-weighted index was at 78.06 from 77.96 yesterday.

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