NZ dollar slips after Q4 GDP, A$ near 3-week highs

By Swati Pandey

SYDNEY, March 15 (Reuters) – The New Zealand dollar skidded on Thursday after mixed economic growth data cemented bets on interest rates staying at record lows for a long time yet, while the Australian dollar hung around 3-week highs.

The kiwi eased more than a quarter of a cent after Thursday’s figures showed the NZ$285 billion ($208 billion) economy grew 0.6 percent last quarter, when analysts had looked for 0.7 percent.

The annual rate was a respectable 2.9 percent, just missing expectations for a robust 3.1 percent rise.

The kiwi was last down 0.3 percent at $0.7309, from as high as $0.7332 touched earlier in the day.

Gross domestic product (GDP) in the December quarter was undermined by imports, particularly of capital goods, while dairy exports were hampered by unusually hot and dry weather.

There were few signs of inflation in the report despite strong private consumption, suggesting the Reserve Bank of New Zealand (RBNZ) will keep rates at 1.75 percent for a prolonged period.

“We continue to expect the RBNZ to leave the official cash rate on hold until the second half of 2019,” said Nick Tuffley, chief economist at ASB.

“Aside from the sharp weather-related fall in agricultural production, the underlying detail of the Q4 figures was relatively robust with many sectors growing stronger than we expected,” Tuffley added.

“The details are encouraging and lift our confidence that growth will recover over the second half of this year.”

Thirteen of New Zealand’s 16 production-based industries recorded some increase in activity with the goods-producing sector eking out 0.4 percent growth over the previous quarter. The services sector expanded by a solid 1.1 percent.

“The figures paint a picture of an economy growing close to trend, and it is a pace we more-or-less see continuing over the coming year or so,” analysts at ANZ said in a note.

“The economy is not firing on all cylinders, but neither is it rolling over to any worrying degree. At this point in the cycle, that is nothing to be scoffed at,” they added.

“Overall, we see few implications for monetary policy. The cash rate is on hold for some time yet.”

Across the Tasman Sea, the Australian dollar AUD=D4 was steady at $0.7879, not far from a three-week top of $0.7916 touched on Wednesday.

The has been on a slow uptrend on a generally weaker greenback since the beginning of March, but renewed fears about a global trade war could weigh over time.

New Zealand government bonds 0#NZTSY= edged higher sending yields about 2.5 basis points lower at the long end of the curve.

Australian government bond futures were barely changed, with the three-year bond contract YTTc1 at 97.915 and the 10-year contract YTCc1 at 97.2700.

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