The New Zealand dollar gained against its trans-Tasman counterpart after the Reserve Bank of Australia’s warning on rising household debt triggered a rethink on the chance of a rate hike next year. 

The kiwi rose to 91.75 Australian cents as at 8am in Wellington from 91.36 cents yesterday. It slipped to 65.93 US cents from 66.10 cents. 

The RBA kept the target cash rate at 1.5 percent as expected, however, traders latched on to governor Philip Lowe’s reiteration that high household debt and low incomes kept a question mark over consumer spending. Investors pared back their expectations for the RBA to raise the benchmark rate next year, bringing the track for interest rates back in line with New Zealand where the central bank doesn’t plan on moving until 2020 at the earliest. 

“As expected the Reserve Bank of Australia maintained its cash rate at 1.5 percent with the RBA warning the market that rising household debt levels and falling housing prices are a source of uncertainty for the economy,” HiFX traders said in a note. “The Australian dollar has since lost ground against all its major rivals with investors pricing out the probability of a rate hike by end 2019.”

The US dollar index rose 0.2 percent as Federal Reserve chair Jerome Powell said he didn’t see signs of inflation spiking despite the low unemployment rate. 

The local currency was unchanged at 57.11 euro cents as Italian bond yields rose on fears the European nation’s credit rating might be downgraded. 

The kiwi traded at 50.80 British pence from 50.69 pence yesterday and fell to 74.12 yen from 75.30 yen. It dropped to 4.5288 Chinese yuan from 4.5384 yuan. The trade-weighted index was at 71.82 from 71.87. 

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