3 Feb 2015

Kiwi jumps on Aust OCR move

8:39 pm on 3 February 2015

The New Zealand dollar fell two-thirds of a US cent on Tuesday but jumped three-quarters of a cent against the Australian dollar after the Reserve Bank of Australia cut its Official Cash Rate.

The Australian central bank cut the rate to 2.25 percent from 2.5 percent which compares with New Zealand's Reserve Bank's cash rate of 3.5 percent.

Australian Reserve Bank Governor Glenn Stevens said Australia's economy continues to grow at a below-trend pace, commodity prices have continued to decline and inflation is the lowest in several years.

The New Zealand dollar fell as low as 72.2 US cents and rose as high as 74.32 Australian cents immediately after the Australian move.

Bank of New Zealand foreign exchange strategist, Raiko Shareef, said the cut to the OCR by the Reserve Bank of Australia took some economists by surprise.

"The market had priced a 70 percent chance of this happening but it was as big a surprise in the sense that only six out of 23 odd economists had predicted this would happen at this meeting."

I think there's definitely a concensus that the RBA would cut in 2015 but most had expected some softening of language before they went ahead and cut rates," he said.