Gains in hard commodity prices bode well for Australia's economy, which has greater exposure to the resources sector than New Zealand, which largely produces soft commodities such as dairy.
The New Zealand dollar fell against the Australian dollar as commodity prices shored up demand for the Aussie, while gaining against the British pound after UK Prime Minister Theresa May signed the formal letter that will trigger the nation's official separation from the European Union.
The kiwi dropped to 91.65 Australian cents as at 5pm from 91.81 Australian cents as at 8am and 92.39 late yesterday. It rose to 56.44 British pence from 56.02 pence.
Australia's currency edged higher against the greenback after Brent crude oil prices increased 0.4 percent to US$51.54 per barrel. Gains in hard commodity prices bode well for Australia's economy, which has greater exposure to the resources sector than New Zealand, which largely produces soft commodities such as dairy.
The kiwi's "certainly been under pressure against the Aussie," which is supported by oil and commodity prices, said Tim Kelleher, head of institutional foreign exchange sales for ASB Bank. Still, the Aussie's strength may be short-lived as oil prices may wane overnight "given the API build-up," he said. According to Reuters, data from the American Petroleum Institute data showed US crude stocks rose by 1.9 million barrels to 535.5 million, compared with analysts' expectations for an increase of 1.4 million barrels.
Kelleher also said markets will be watching to see how Europe reacts now Brexit has been officially signed. The Brexit letter is due to be delivered to Brussels later on Wednesday. Talks will then begin on key issues such as the terms of the separation and future economic relations, including trade deals. The kiwi was little changed at 64.78 euro cents from 64.80 cents yesterday.
Given a dearth of data both home and abroad, ASB's Kelleher said the kiwi will likely continue to wash around its current levels.
The local currency fell to 70.07 US cents from 70.40 US cents late yesterday while the trade-weighted index declined to 75.95 from 76.21.
The kiwi fell to 4.8286 yuan from 4.8451 yuan yesterday and traded at 77.94 yen from 77.86 yen.
The two-year swap rate rose 2 basis points to 2.32 percent while 10-year swaps rose 2 basis points to 3.42 percent.
(BusinessDesk)
