NZ dollar pares gains to be little changed as Fed bets increase, commodities soften

Tuesday 30th August 2016

The New Zealand dollar pared its gains to be little changed as traders added bets that the Federal Reserve will raise interest rates this year and commodity prices fell, weighing on the currencies of raw material exporters.

The kiwi traded at 72.47 US cents at 5pm in Wellington from 72.39 cents late yesterday.The trade-weighted index rose to 77.18 from 77.14.

Traders are currently putting on 44 percent odds of a Fed rate hike in September and 63 percent odds of a December hike, having added to their bets in the wake of comments by Fed chairwoman Janet Yellen and vice chairman Stanley Fischer at the end of last week. Non-farm payrolls data due out in the US on Friday are expected to show the world's largest economy added 180,000 jobs in August but a stronger number may be needed to support Fischer's view there's room for two hikes, starting in September.

"You'd want to be above 200,000 to err on the side of the Fed doing anything, I would've thought," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank. "In general terms, the kiwi is going sideways. We're seeing a little bit of US dollar strength with crude oil weaker" and that's adding some weakness to commodity currencies, he said.

The CRB Index of commonly traded global commodities fell about 0.9 percent overnight.

The kiwi didn't move much after government figures showed residential building consents fell 11 percent in July, partly reversing a spike higher in June due to applications for retirement villages and multi-unit dwellings. Seasonally adjusted dwelling consents slipped to 2,629 in July from 2,938 in June, when they jumped 22 percent, Statistics New Zealand said today. On an annual basis, dwelling consents rose 13 percent to 29,084, the highest level for a July year since 2004

The kiwi traded at 95.71 Australian cents from 95.86 cents late yesterday and rose to 4.8373 yuan from 4.8302 yuan. It rose to 64.89 euro cents from 64.62 cents and gained to 55.40 British pence from 55.15 pence. The kiwi rose to 74 yen from 73.67 yen.

New Zealand's two-year swap rate was unchanged at 1.96 percent and 10-year swaps fell 4 basis points to 2.37 percent.

BusinessDesk.co.nz

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