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NZ dollar little changed vs. Australian dollar after RBA talks down currency

The New Zealand dollar was little changed against its trans-Tasman counterpart after the Reserve Bank of Australia kept its key rate at a record low, while saying a weaker currency was desirable to foster balanced economic growth.

The kiwi traded at 92.53 Australian cents at 5pm in Wellington from 92.65 cents immediately before the release, and 92.45 cents yesterday. It was little changed at 78.77 US cents from 78.89 cents at 8am, up from 78.09 cents yesterday.

The RBA kept the target cash rate 2.5 percent, as expected, saying "monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target." Governor Glenn Stevens said the Australian dollar was still above most estimates of its fundamental value given recent declines in commodity prices, and that "a lower exchange rate is likely to be needed to achieve balanced growth in the economy." The Australian dollar traded at 85.13 US cents at 5pm in Wellington from 84.80 cents immediately before the release, near its lowest level in more than four years.

"The song-sheet's relatively unchanged from the RBA, they're basically on the fence," said Stuart Ive, senior dealer foreign exchange at OMF in Wellington. "Kiwi strength against the Aussie is still prevailing."

Fonterra Cooperative Group's GlobalDairyTrade auction on Tuesday in the US will be watched by investors for another gauge on the strength of New Zealand's biggest export commodity. Prices have almost halved since February, and economists are anticipating Fonterra's board will have to cut its forecast payout to farmers for the 2015 season when it next meets on Dec. 8.

OMF's Ive said the kiwi may drift off against the greenback in Northern Hemisphere trading after its rally yesterday with the dairy likely to weigh on the currency and ahead of US employment data at the end of the week.

The ANZ Commodity Price Index showed New Zealand's commodity prices fell for a ninth month in November, due to ongoing weakness in dairy products.

The local currency rose to 93.27 yen at 5pm in Wellington from 92.87 yesterday after Moody's downgraded Japan to A1 from Aa3, citing uncertainty over the nation's fiscal deficit-reduction programme and its effect on growth policies.

The kiwi gained to 63.19 euro cents from 62.71 cents yesterday, an was little changed at 50.06 British pence from 50.02 pence. The trade-weighted index advanced to 78.71 from 78.30 yesterday.