31 Jul 2013

NZ dollar rises against Australian

7:07 pm on 31 July 2013

The New Zealand dollar hit a new near five-year high against its Australian counterpart after Fonterra's announcement of a higher forecast dairy payout and comments from the Reserve Bank of Australia.

The kiwi rose as high as 88.41 Australian cents on Wednesday compared with 87.98 cents late on Tuesday.

Reserve Bank of Australia Governor Glenn Stevens said on Tuesday that sluggish inflation had left room for his official interest rate to be cut.

Dr Stevens expressed concern at the persistently weak level of business confidence and said uncertainty over the international economy and the shift to a new phase of the mining boom are dragging down the mood.

"Business capital spending outside the resources sector has been quite subdued, housing investment likewise has been low, there's ample scope for both of those to rise over the next several years - that's by no means a certainty though."

Dr Stevens also suggested the Government was not helping amid uncertainty over the upcoming election date, the ABC reports.

ASB Bank head of external foreign exchange sales Tim Kelleher said there had been a strong sell-off of the Australian dollar over the previous one to two days.

"Given that the market here expects the next move from the Reserve Bank of New Zealand to be a rate hike, we're seeing quite a clear difference between the two economies."

Mr Kelleher said the Fonterra forecast was slightly above what the banks had expected.