By Wayne Cole
SYDNEY (Reuters) – The Australian dollar moved to within striking distance of recent highs on Tuesday as the central bank reaffirmed the outlook for steady policy, while stealing a march on its New Zealand counterpart.
The Aussie wobbled just a little on news China had begun an anti-dumping investigation into imports of wine from Australia.
The currency was still up 0.1% at $0.7222 , having risen 0.6% overnight as a dip in Treasury yields pulled the U.S. dollar down again. Stiff resistance lies at the recent 18-month top of $0.7242, with support around $0.7200.
Minutes of the Reserve Bank of Australia’s (RBA) August policy meeting showed the board saw no need to adjust its stimulus package at the moment, but was ready to ease again if needed.
The central bank has already trimmed its forecasts for economic recovery to take account of the new coronavirus lockdowns in Victoria, which it warned was a “setback.”
Data on card spending from ANZ showed a steep pullback in Victoria last week had flattened growth nationally.
“Outside Victoria, the growth in total ANZ-observed spending was much stronger at 33% year-on-year. Victoria’s total spending was −36% y/y,” said ANZ economist Adelaide Timbrell.
“National ANZ-observed spending grew just 0.4% y/y for the week to 15 August, the worst result since the week to 17 May.”
The New Zealand dollar was lagging at $0.6548 , having repeatedly tested support around $0.6520.
The RBA’s reluctance to act further is in marked contrast with the Reserve Bank of New Zealand (RBNZ), which last week sharply expanded its bond-buying campaign to NZ$100 billion ($65.41 billion) and extended it out to mid-2022.
The RBNZ is also ready to contemplate negative rates if more easing is needed, something the RBA has ruled out.
The result has been a marked rally in the Aussie against the kiwi, which slid below A$0.9100 for the first time since late 2018. The next target is a spike low from 2018 at A$0.8975.
“Given the continued diverging interest rate expectations of the RBNZ and RBA, NZDAUD is now testing its multi-year trend support levels around 91 cents,” said Hamish Wilkinson, a senior dealer at Kiwibank.
“If negative rates become a reality in the coming months, then so too is the likelihood that NZDAUD will be trading well below 90-cents.”
(Editing by Aditya Soni)
Video: ‘Biggest economic contraction in decades’ expected: RBA Governor (Sky News Australia)