AUD/NZD near Eight Year Low around 1.06

New Zealand’s dollar was near an eight-year high against Australia’s currency after the smaller nation reported accelerating inflation, bolstering the case for its central bank to raise interest rates.

Traders saw a 64 percent chance that the Reserve Bank of New Zealand will increase the official cash rate by a quarter percentage point to 2.75 percent at a policy meeting on Jan. 30, according to data on overnight-index swaps compiled by Bloomberg. The Australian dollar snapped a gain versus its U.S. peer after overnight lending rates among banks in China soared yesterday by the most in seven months.

“The view is that the RBNZ was looking for an excuse to maybe start the tightening cycle as early as next week, then maybe this headline increase would give them the excuse to do that,” Ray Attrill, the global co-head of currency strategy at National Australia Bank Ltd. in Sydney, said of market bets on a rate increase. “That’s the reason that the New Zealand dollar has jumped up on the numbers.”

Bloomberg

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