NZ dollar firms against USD; trading quiet amid fragile sentiment

Monday 29th October 2018

The New Zealand dollar continued to recover against the greenback as risk appetite improved but trading was light amid fragile sentiment.

The kiwi traded at 65.32 US cents at 5pm in Wellington, from 65.16 US cents at 8am in Wellington and 65.09 cents on Friday in New York. The trade-weighted index was at 71.73 from 71.48 last week.

The kiwi fell sharply late last week amid intense volatility on global stock markets. It recovered ground overnight Friday on speculation the People's Bank of China is prepared to intervene in currency markets to support the yuan.

The lack of further news on that front means "Asia is being quite cautious," said Martin Rudings, senior dealer foreign exchange at OMF.

ANZ chief economist Sharon Zollner said volatility is likely to continue.

"Chinese authorities are walking a tightrope between allowing sufficient depreciation to cushion the blow to exporters of the tariff war with the US, while not spurring expectations of a greater depreciation and hence large and potentially destabilising capital outflows," she said.

Australian third-quarter CPI data due Wednesday will be closely watched, Rudings said. A higher than expected figure "might cause a bit of kiwi-Aussie action" to the downside, he said. The kiwi traded at 92.00 Australian cents from 91.87 cents last week.

"The kiwi should be capped against the Australian dollar with iron ore moving higher and dairy prices not really moving," he said.

Investors will also be keeping a close eye on events offshore, in particular around the China-U.S. trade conflict, U.S. corporate earnings and issues like the Italian budget woes.

"Really the kiwi is just a victim of what happens in London and New York" markets, Rudings said.

The New Zealand dollar was at 73.08 yen from 72.84 yen. The local currency lifted to 57.31 euro cents from 57.06 cents last week and 50.88 British pence from 50.74 pence.

New Zealand's two-year swap rate fell 1 basis point to 1.98 percent; the 10-year swaps fell 2 basis points to 2.78 percent.

(BusinessDesk)

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