NZ dollar little changed at elevated levels after RBNZ keeps rates on hold

Friday 10th June 2016

The New Zealand dollar held at elevated levels after the Reserve Bank yesterday kept interest rates on hold, keeping the country's yields attractive as other central banks cut rates.

The kiwi hit a high of 71.46 US cents overnight, matching the one-year high it touched yesterday afternoon. It slipped to 71.18 US cents at 8am in Wellington, from 71.37 cents at 5pm yesterday. The trade-weighted index was at 75.76 from 75.74 yesterday, having touched a high of 75.94 overnight.

The New Zealand dollar remained relatively unchanged from late yesterday after jumping when the Reserve Bank announced it would refrain from cutting interest rates due to concerns about the potential impact on an overheated housing market. The decision to hold pat contrasted with yesterday's move by the Bank of Korea, which unexpectedly cut interest rates to a record low, and underpins the attractiveness of local yields.

"The New Zealand dollar has appreciated so quickly in the last 24 hours that it would be appropriate for a period of consolidation," said Peter Cavanaugh, an adviser at Bancorp Treasury Services. "Staunch Australian and New Zealand central banks are saying 'well we don't really think we are going to do anything for a while, we are going to keep interest rates where they are' and their high yields are becoming more attractive."

Bancorp's Cavanaugh said the kiwi is heading for a period of consolidation as investors await the Federal Reserve's interest rate decision next week, and the so-called Brexit referendum on Britain leaving the European Union the following week.

In New Zealand today, data is released on accommodation and electronic spending.

The New Zealand dollar advanced to 95.66 Australian cents from 95.57 cents, gained to 62.86 euro cents from 62.57 cents, and increased to 76.22 yen from 76.06 yen. It slipped to 4.6713 yuan from 4.6812 yuan and declined to 49.14 British pence from 49.21 pence.

BusinessDesk.co.nz

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