NZ dollar treading water as markets focus on Iran

Monday 22nd July 2019

The New Zealand dollar was largely unchanged as market tensions ramp up after Iran seized a British-flagged tanker.

The kiwi was trading at 67.62 US cents at 8am in Wellington from 67.61 late Friday in New York. The trade-weighted index was at 73.89 from 73.87.

Markets are jittery as they await a UK response after the Iranian Revolutionary Guards seized the Stena Impero in the Strait of Hormuz on Friday in apparent retaliation for the British capture of an Iranian tanker two weeks earlier.

"As markets open this morning, geopolitics will be the initial focus," with the capture of the UK tanker "probably going to prompt volatility," said Kiwibank trader Mike Shirley.

While oil markets will bear the brunt of any reaction, Shirley noted that "volatility and risk-off has a tendency to bleed into other asset classes." A dearth of data will also mean the situation garners more attention, he said.

OMF treasury manager Stuart Ive said the UK government is "being dragged into an escalating situation but has very limited capabilities at its disposal."

The greenback also continued to benefit after the New York Federal Reserve clarified that New York Fed President John Williams’ assertion that policymakers need to “act quickly” as economic growth slows was drawing from research, not hinting at what may happen at this month’s Federal Open Market Committee meeting.

The speech had initially weighed on the US dollar. However, expectations for a 50 basis-point rate cut at the end of the month fell and now stand at around 22.5 percent. A 25-point cut remains fully priced.

The New Zealand dollar was trading at 54.02 British pence from 54.08 late Friday in New York. It was at 95.97 Australian cents from 95.94, unchanged at 60.29 euro cents, at 72.86 yen from 72.83, and at 4.6531 Chinese yuan from 4.6544

(BusinessDesk)

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