NZ dollar struggles to gain traction after banking review, weak commodity prices

Monday 5th November 2018

The New Zealand dollar remained under pressure against the US dollar after a review found New Zealand banks need to improve the way they manage risks around misconduct and local data pointed to an ongoing fall in commodity prices.

The kiwi traded at 66.37 US cents at 5pm in Wellington versus 66.36 US cents at 8am in Wellington and 66.52 at 5pm last Friday. The trade-weighted index was at 72.58 from 72.74.

A review by the Reserve Bank of New Zealand and the Financial Markets Authority found none of the widespread misconduct seen in Australia's financial sector but did identify "significant weaknesses" in the processes New Zealand's 11 largest banks have for monitoring conduct within their organisations. "The governance of conduct risk in the banks requires serious attention," FMA chief executive Rob Everett said.

The review found that some banking practices - such as sales incentives - need to be curtailed and the "kiwi lost favour," said Martin Rudings, senior dealer foreign exchange at OMF.

The kiwi was also weighed on by news that commodity prices fell for the fifth month in a row, according to ANZ's Commodity Price Index for October. "The terms of trade are slipping," said Rudings.

However, markets are largely focused on the US mid-term elections, with results expected Wednesday New Zealand time.

The Reserve Bank of Australia's rate decision and statement, followed by the Federal Open Market Committee statement and the kiwi central bank's monetary policy decision and statement will also be key for direction.

Rudings said the kiwi may fall against the Australian dollar if the RBA is upbeat about their economy, particularly if the RBNZ's commentary retains the option of a cut to address slowing domestic growth.

The kiwi traded at 92.37 Australian cents from 92.44 Australian cents.

The FOMC meanwhile, is expected to remain upbeat. That coupled with last week's strong US jobs numbers will add to the view the Fed will continue raising rates and could even lift them faster than currently expected.

"I still think the US dollar is the best place to be," said Rudings.

The New Zealand dollar traded at 51.12 British pence from 51.21 British pence Friday. It was at 4.5885 Chinese yuan from 4.6100 yuan and traded at 75.13 yen from 75.97 yen. It was at 58.30 euro cents from 58.36 cents Friday.

(BusinessDesk)

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