NZ dollar treads water as central bank meetings loom

Wednesday 26th September 2018

The New Zealand dollar stuck to a tight range ahead of the Reserve Bank and Federal Reserve policy reviews tomorrow.

The kiwi traded at 66.47 US cents as at 8am in Wellington from 66.40 cents yesterday. The trade-weighted index edged up to 72.02 from 71.97.

Central bank meetings in the US and New Zealand are expected to continue the diverging monetary policies in the two nations, which has seen US bond yields rise above their Kiwi counterparts, increasing the allure of the greenback. The US 10-year Treasury was recently at 3.09 percent compared to New Zealand's 2.71 percent equivalent. RBNZ governor Adrian Orr told Radio New Zealand yesterday lifting inflation would not be a big challenge for the bank. He isn't expected to move the official cash rate from 1.75 percent.

"Last week's GDP was a home run for the kiwi and suggests the RBNZ while remaining cautious, could paint a much rosier picture on growth relative to the previous OCR," Oanda Asia Pacific head of trading Stephen Innes said in a note. "Given the lack of liquidity, there is always the chance for an outsized move on any surprise."

US President Donald Trump reaffirmed his 'America First' trade stance in a speech to the United Nations. US trade policy has pushed around financial markets since Trump took office on fears the rising tide of protectionism will stifle global growth.

Local data today include August merchandise trade and the ANZ Business Outlook survey, which has been showing signs of increased pessimism among firms.

Bank of New Zealand senior markets strategist Jason Wong said the decline in business confidence had been a poor steer for actual activity and traders will probably react to a stronger reading.

"Weakness in the survey played a role in the RBNZ’s downgrading of the growth outlook at the August MPS," he said. "So any recovery, alongside the recent stronger Q2 GDP data, would give the Bank some food for thought about its projections."

The kiwi was almost unchanged at 91.64 Australian cents from 91.63 cents yesterday and increased to 75.06 yen from 74.89 yen. It traded at 56.48 euro cents from 56.53 cents and decreased to 50.42 British pence from 50.65 pence. It rose to 4.5620 Chinese yuan from 4.5536 yuan.

(BusinessDesk)

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