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Australian dollar pops to 4-week high, NZ dollar lags after GDP
[WELLINGTON] The Australian dollar rose to four-week highs on Thursday, while the New Zealand dollar lagged after news the economy grew a little more slowly than expected in the second quarter.
Trade was subdued, however, with attention was firmly set on the outcome of the two-day Fed meeting later in the day, with markets still guessing whether the Fed will hike rates on Thursday, or opt for December or early next year.
The Australian dollar popped above US$0.7200 for the first time since late August as rallying equities underpinned sentiment. It was last at US$0.7199 with resistance found at US$0.7230 where dealers cited stops.
Also helping was rising speculation the Fed would delay raising interest rates after a surprising 0.1 per cent decline in US consumer prices in August.
The Antipodean currencies have proved remarkably resilient to volatility in commodity and Chinese stock markets, with the Aussie up 1.5 per cent so far this week and the kiwi 0.7 per cent higher.
The Aussie fell below 69 US cents earlier this month for the first time since 2010.
The New Zealand dollar slipped to US$0.6358, from US$0.6369 early, but remained within a well defined range of US$0.6244 to US$0.6424 seen so far this month.
It edged lower after news the economy grew a sluggish 0.4 percent in the second quarter, versus forecasts of 0.5 per cent, supporting the case for another rate cut by the Reserve Bank of New Zealand (RBNZ). "The economic outlook remains precarious. We have just revised down our growth forecasts for late 2015-mid 2016 in light of our lower dairy production outlook," said Jane Turner, a senior economist at ASB Bank. "We continue to expect the overnight cash rate to fall a further 25 basis points, but the timing is a close call between October or December." The vast majority of analysts forecast a cut before the end of the year with an around 50-50 chance of a move in October.
The central bank cut rates to 2.75 per cent last week and warned that further easing may follow if the economy remains sluggish.
Support was found at US$0.6280.
New Zealand government bonds eased, sending yields as much as 4 ticks higher on the long end of the curve.
Australian government bond futures fell to one-month lows, with the three-year bond contract off five ticks at 98.040. The 10-year contract was down 4.5 ticks to 97.1250.