NZ dollar gains as traders await US Fed chair Yellen's speech

Tuesday 29th March 2016

The New Zealand dollar gained as slowing US inflation prompted traders to dial back expectations for future rate hikes while they await Federal Reserve chair Janet Yellen's first public speech since the central bank's last policy review.

The kiwi rose to 67.51 US cents at 5pm in Wellington from 67.24 cents at 8am, and 66.84 cents yesterday. The trade-weighted index advanced to 71.96 from 71.52 last week.

The dollar index, a measure of the greenback against a basket of currencies, fell after government data showed the PCE deflator, the Fed's preferred measure of inflation, missed expectations. That comes ahead of a speech by Yellen to the Economic Club of New York on Tuesday for her view on the US economy and what her thoughts are on the future path of interest rates. A series of Federal Reserve officials last week largely anticipated a more rapid ascent for rates after the central bank scaled back its projected increases for the coming year.

"It will be interesting to see if she sticks to the dovish tone of the FOMC (Federal Open Market Committee) - I'm inclined to think she will do," said Stuart Ive, senior dealer foreign exchange at OMF in Wellington. "That consumer data was very important in terms of growth, and it's led to a bit of weakness in the US dollar which led to the kiwi gaining."

In a shortened week, the local currency will take its cues from overseas as traders watch Yellen's speech, US non-farm payrolls figures on Friday and Chinese manufacturing data.

New Zealand's two-year swap rate increased one basis point to 2.26 percent from last week, and 10-year swaps were up two basis points to 3.09 percent.

The local currency rose to 89.23 Australian cents from 88.92 cents yesterday and gained to 4.3929 Chinese yuan from 4.3533 yuan. It was little changed at 47.40 British pence from 47.28 pence yesterday and climbed to 60.29 euro cents from 59.87 cents. It advanced to 76.62 yen from 75.92 yen yesterday.

BusinessDesk.co.nz

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