NZ dollar slips from month-high ahead of US payrolls; Fed rate hikes questioned

Friday 5th February 2016

The New Zealand dollar fell from a month-high ahead of employment data in the US that may give investors more clarity on how much time the US Federal Reserve will take to raise interest rates again.

The kiwi traded at 66.93 US cents at 5pm in Wellington, from 67.46 cents at the start of the day and from 67.25 cents late yesterday. The currency is heading for a 3.5 percent weekly gain against the greenback. The trade-weighted index was little changed at 72.65 from 72.61 yesterday.

Investors are awaiting the key US non-farm payrolls report, which is expected to show US employers added 190,000 workers in January, while the unemployment rate remained at 5 percent. A number above 190,000 should be positive for the greenback, showing healthy growth in the US labour market, but investors are betting the Fed may hold off on raising interest rates again any time soon, which is taking the shine off the US dollar.

"What we're seeing clearly is a clear-out of all the US dollar bulls," said Alex Hill, head of corporate foreign exchange at NZ Forex. "It has been a painful few days for people holding onto US dollar long positions."

Should payrolls prove strong and the greenback not rise, that would show the market is more concerned about reconfiguring its expectations for the next Fed move, Hill said. A key level is 66.80 US cents. If it is above that level early next week it would point to further gains, while a weaker level would point to a decline, he said.

Dallas Fed president Robert Kaplan said the central bank should be "patient" on rate increases, reiterating recent comments from other Fed officials. The lower greenback boosted commodity prices and increased the lure of higher yielding currencies, underpinning the kiwi.

The New Zealand dollar rose to 93.03 Australian cents from 92.78 cents yesterday and gained to 45.93 British pence from 45.77 pence. It advanced to 4.3920 yuan from 4.3849 yuan. It slipped to 77.98 yen from 78.62 yen yesterday, and declined to 59.72 euro cents from 60.10 cents.

The two-year swap rate was unchanged at 2.61 percent and 10-year swaps were steady at 3.29 percent.

BusinessDesk.co.nz

Comments from our readers

No comments yet