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NZ dollar continues gain against Aussie

NZ NewswireNZ Newswire 2/06/2016 Tina Morrison

The New Zealand dollar gained against the Australian dollar as divergent interest rates and a weaker Australian economy prompt investors to favour the kiwi.

The kiwi hit 94.42 Australian cents overnight, almost matching the three-month high of 94.43 cents reached the previous night. The local currency was trading at 94.14 Australian cents at 8am in Wellington, from 94.10 cents at 5pm on Thursday. It slipped to 67.98 US cents from 68.15 cents.

The New Zealand dollar has gained 6 per cent against the Aussie the past month as weaker economic indicators in Australia prompt investors to price in the chance of further interest rate cuts in Australia.

New Zealand, meanwhile, is seen pushing rate cuts out to later in the year.

Australia's benchmark interest rate already sits at 1.75 per cent, below New Zealand's benchmark at 2.25 per cent.

"New Zealand offers a better story, a better reward, in terms of interest rates and on the economic performance, than Australia does," said Bancorp Treasury Services' Peter Cavanaugh.

"There's a pool of investor money that likes to sit in Australia and all it does at the margin is decides which side of the Tasman that it wants to be on, and it's come back over here."

In New Zealand, Auckland real estate agency Barfoot & Thompson releases its May sales data, vehicle registration figures for May are out. Treasury publishes the government's 10-month financial statements, Statistics New Zealand releases first-quarter building work data, and ANZ publishes its monthly commodity index.

Elsewhere, the US releases non-farm payrolls employment data, China publishes manufacturing data and Australia has services data.

The New Zealand dollar advanced to 60.94 euro cents from 60.81 cents after the European Central Bank kept interest rates unchanged, and edged up its inflation predictions.

The kiwi slid to 73.96 yen from 74.39 yen, edged lower to 47.11 British pence from 47.18 pence, and declined to 4.4741 yuan from 4.4829 yuan. The trade-weighted index was at 73.37 from 73.45.

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