NZ dollar up after cash rate held

Reported by AAP
Thursday, January 31, 2013

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The New Zealand dollar rose after the Reserve Bank of New Zealand held the official cash rate at 2.5 per cent even though the central bank said the currency is overvalued.

The kiwi rose 83.40 US cents from 83.11 cents just before Thursday's review and 83.71 cents at 5pm on Wednesday.

It had fallen overnight to 82.99 cents when global sentiment took a hit from news the US economy contracted in the fourth quarter for the first time since 2009, and the S&P 500 slipped from a five-year high.

In leaving the official cash rate unchanged at 2.5 per cent bank governor Graeme Wheeler said global growth will recover in 2013 as will the local economy.

He said subdued inflation mainly reflected the impact of the overvalued New Zealand dollar.

"The high currency is directly suppressing inflation on traded goods, and is undermining profitability in export and import competing industries.

"At the same time, the labour market remains weak and fiscal consolidation is dampening growth," he said.

US gross domestic product fell at a 0.1 per cent annual rate after expanding at a 3.1 per cent clip in the third quarter. No economists polled by Reuters had predicted a contraction.

The US Federal Open Market Committee, as expected, left in place its bond-buying stimulus plan, and kept interest rates low, in a statement released just ahead of the RBNZ rate review.

The Australian fourth-quarter terms of trade report on Thursday will also be closely watched.

The kiwi was at 80.13 Australian cents after 9am from 79.74 cents at 8am and 79.94 cents at 5pm on Wednesday.

It was at 75.70 yen at 8am from 76.04 yen at 5pm on Wednesday, at 61.29 euro cents from 62.05 cents and was at 52.63 British pence from 53.13.

The trade-weighted index was at 74.85 from 75.29.

29/07/2014 22:45Sydney, Australia. 29 July,2014
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