NZ dollar pares slide as traders mull scope of rate hikes; GDP, Federal Reserve loom

Monday 17th March 2014

The New Zealand dollar pared a decline against the greenback and the yen as traders look ahead to economic growth figures for confirmation of the local central bank's track of interest rate increases.

The kiwi dollar traded at 85.35 US cents at 5pm in Wellington, up from 85.25 US cents at the start of the day and from 85.34 cents in New York on Friday. The kiwi rose to 86.69 yen from 86.34 yen at 8am in Wellington.

Figures on Thursday are expected to show the economy grew 0.9 percent in the fourth quarter of 2013, just above the central bank's forecast last week, when it raised the official cash rate a quarter point to 2.75 percent and flagged the prospect of further increases. Also on Thursday will be the outcome of the US Federal Reserve monetary policy meeting, which traders expect to result in a further US$10 billion being shaved off its monthly bond-buying programme.

"Everything is out on the table, the RBNZ is clearly priced into the market," said Alex Hill, head of dealing at HiFX. "So from that position they can only really disappoint."

He said market participants are using the word tapering again in relation to the Fed after a hiatus and every step it takes to reduce the amount of dollars it is pumping into the financial system is ultimately going to help lift the greenback.

The local dollar may trade between 83.40 US cents and 86.50 cents this week, according to a BusinessDesk survey of nine traders and strategists. Six predict the kiwi will decline this week, while one expects an increase and two see it largely unchanged.

The kiwi dropped to 94.30 Australian cents from 94.64 cents. It traded at 61.36 euro cents from 61.32 cents at 8am and from 61.63 cents at 5pm on Friday, and was at 51.29 British pence, little changed from this morning and from 51.38 pence on Friday.

BusinessDesk.co.nz

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