NZ dollar edges up as traders await data for clues on Fed rate hikes

Tuesday 30th August 2016

The New Zealand dollar rose as traders await economic data that may provide clues to the timing of US interest rate hikes after US Federal Reserve officials revived expectations of a move this year.

The kiwi traded at 72.54 US cents at 8am in Wellington, from 72.39 cents late yesterday.The trade-weighted index rose to 77.23 from 77.14.

US Labour Department figures on Friday are expected to show the US economy added 180,000 jobs in August, based on a Reuters forecast, a strong enough pace to support comments from Fed chairwoman Janet Yellen and vice chairman Stanley Fischer that the case for hikes has increased and, in Fischer's case, that there's room for two increases this year. That contrasts with New Zealand Reserve Bank governor Graeme Wheeler's signal that he has another cut to the official cash rate up his sleeve as he tried to revive stubbornly low inflation. The kiwi dollar tumbled after the Fed comments on Friday in the US.

"The RBNZ will be happy that Fischer’s comments knocked more than a cent off its value, but there is still much to be liked about the currency amidst a strong recovery in dairy prices and, on the RBNZ’s own estimates, expectations for tightening capacity pressures," said Jason Wong, currency strategist at bank of New Zealand, in a note.

"The prospect of tighter US monetary policy over the near term and the weaker New Zealand dollar provides the RBNZ a little breathing space – we’d emphasise the word ‘little’, as on a TWI basis the NZD remains above the level seen at the beginning of last week, despite the increased prospect of tighter US monetary policy," he said.

The TWI is above the average 76 level the central bank projected for the third quarter in its monetary policy statement on Aug. 11. A strong kiwi keeps a lid on imported inflation and the consumers' price index has remained below the central bank's target band for seven quarters. New Zealand building consents for July are due out today and may show the property market still has plenty of heat, one of the factors Wheeler must weigh up in cutting interest rates.

The kiwi traded at 95.76 Australian cents from 95.86 cents late yesterday and rose to 4.8399 yuan from 4.8302 yuan. It rose to 64.80 euro cents from 64.62 cents and gained to 55.31 British pence from 55.15 pence. The kiwi rose to 73.84 yen from 73.67 yen.

BusinessDesk.co.nz

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