The New Zealand dollar rose on Thursday after the country's central bank signalled a faster track for inflation and interest rate increases, while the Australian dollar stayed within recent ranges. The Reserve Bank of New Zealand (RBNZ) left interest rates at a record low 1.75 percent, but said it expected inflation to jump back to the middle of its 1-3 percent target band almost a year earlier than previously thought.
In response, the New Zealand dollar climbed as high as $0.6974, a level not seen since October 24, from Wednesday's low of $0.6898. The kiwi dollar is on track to end the week higher for its second straight weekly gain, although it is still down over 7 percent since mid-year. The currency was bruised badly since the Labour coalition won power in October as investors feared its left-leaning policies would slow growth and foreign investment.
Across the Tasman sea, the Australian dollar trod water around $0.7685, staying trapped in a recent range of $0.7622 and $0.7729. Technical analysts say the Aussie needs to break above $0.7700 to gain upside momentum. New Zealand government bonds slipped, sending yields 6-7 basis points higher at the long-end of the curve. Australian government bond futures eased too, with the three-year bond contract down 2 ticks at 98.030. The 10-year contract was off 3 ticks at 97.3800. Governor Grant Spencer told a media conference that policies proposed by the new Labour government could boost economic growth by around half a percentage point in each of the next three years.