The New Zealand dollar tumbled against the Australian dollar after the Reserve Bank of Australia unexpectedly kept its cash rate unchanged, delaying the prospects of parity between the two currencies.
The kiwi fell to 98.04 Australian cents as at 5pm in Wellington, from 99.37 cents at the start of the day and as high as a record 99.78 cents overnight. The local currency traded at 75.42 US cents from 76 cents yesterday.
Ahead of today's statement from the RBA, traders had been betting on a 78 percent chance of a quarter point cut to the cash rate to a record low 2 percent. A cut has been delayed rather than cancelled though, with cash rate futures now pricing in a 76 percent chance of a cut in May. Governor Glenn Stevens made a statement broadly similar to what he said last month, reiterating that "further easing may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target."
"The RBA has taken the market by surprise," said Mark Johnson, senior dealer at OMF. "It has left rates unchanged but also left us with a pretty dovish statement."
Traders had pushed the cross rate higher in a "holiday-thinned" market yesterday and as a result there was "an unwinding of positions" when the RBA didn't deliver a cut, he said. Still, given lower rates are expected to eventuate across the Tasman, "we will see sellers coming into the Australian dollar at these elevated levels," he said.
The kiwi fell to 68.99 euro cents from 69.20 cents late yesterday, ahead of a deadline at the end of the week for Greece to pay 450 million euros owed to the international Monetary Fund.
The kiwi fell to 90.11 yen from 90.45 yen and traded at 50.57 British pence from 50.92 pence. The trade-weighted index fell to 78.70 from 79.53 yesterday.