http://nz.biz.yahoo.com//090625/16/d1rc.html
SYDNEY, June 26 (Reuters) - The Australian dollar shot up
against the New Zealand dollar on Friday after data showed New
Zealand's economy shrank 1 percent in the first quarter,
stirring speculation that perhaps Kiwi rates may fall further.
* Although the growth contraction was in line with the
Reserve Bank of New Zealand's (RBNZ) prediction, it was
slightly worse than market forecasts for a 0.7 percent
decline.
* That encouraged talk the RBNZ remained under pressure to
further cut rates from the record low of 2.5 percent. Still,
many analysts think the RBNZ is reluctant to cut rates much
further because because Kiwi rates need to be high enough to
attract investors and fund the country's current account
deficit.
* Aussie charged to as high as NZ$1.2523 AUDNZD=R, from
NZ$1.2479 seen here late Thursday.
* Aussie's yield appeal is bolstered against the Kiwi
dollar right now because Australian rates are higher at 3
percent.
* Aussie was steady on the U.S. dollar and yen at $0.8035
and 76.98 yen AUDJPY= respectively. It had traded at $0.7989
and 76.91 yen here late Thursday.
* A jump in U.S. stocks overnight had boosted the Aussie,
as stock investors appeared to shrug off new signs of weakness
in the U.S. job market. [ID:nN25259990]
* Japanese consumer price data out Friday showed core
consumer prices down 1.1 percent, suggesting a deepening
deflation in Japan, the top buyer of Australian exports.
* Australian bond futures rose, tracking gains in
Treasuries, which got a lift from strong demand in an auction
for new seven-year notes. [US/]
* Three-year bond futures YTTc1 rose 0.07 points at
95.16, while ten-year bond futures YTCc1 gained 0.10 point to
94.425.
* Rising short-term yields have flattened the local yield
curve, with the spread of 10-year cash yields over three-year
yields at 105 basis points, the narrowest since January.
* Some economists said rising local short-term yields
reflected expectations of rate hikes, although they said such
speculation may be fanciful since any recovery in economic
growth is unlikely to be strong enough to justify higher
rates.
(Reporting by Koh Gui Qing)
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