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NZ dollar surges against Aussie

NZ NewswireNZ Newswire 1/05/2016 Tina Morrison

The New Zealand dollar rose to an eight-week high against the Australian dollar ahead of a potential interest rate reduction at the Reserve Bank of Australia meeting on Tuesday.

The kiwi touched 91.89 Australian cents and was trading at 91.66 cents at 8am in Wellington, from 91.08 cents at 5pm on Friday. The local currency was trading at 69.65 US cents from 69.73 cents at the New York close and 69.75 cents on Friday.

The Australian dollar has weakened after a report last week showed inflation fell in the March quarter, surprising economists who had expected a gain and prompting speculation the RBA may cut interest rates further.

PMI data released at the weekend showed manufacturing activity in China expanded marginally for a second month but only just above the 50-point mark that separates expansion from contraction.

Local focus on Monday will be on an Australian NAB business confidence report ahead of the RBA meeting.

"The market now assigns around equal odds to a cut tomorrow, ensuring there will be a notable currency response regardless of the outcome," said BNZ's Kymberly Martin.

"The slightly softer China PMI releases over the weekend limit the prospects for a rebound in the Australian dollar into tomorrow's meeting."

She said her NAB colleagues in Australia believe last week's low inflation reading offers the RBA the opportunity to add more support to the domestic economy, without risk to its inflation target.

The New Zealand dollar fell to 60.79 euro cents from 61.22 cents on Friday, declined to 74.04 yen from 74.77 yen, and slipped to 4.5090 yuan from 4.5155 yuan.

It advanced to 47.71 British pence from 47.60 pence. The trade-weighted index was little changed at 73.34 from 73.31 at the end of last week.

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