NZ dollar under pressure in quiet Christmas Eve trading

Monday 24th December 2018

The New Zealand dollar trod water in quiet Christmas Eve trading but may continue to fall into the New Year as uncertainty over geopolitics keeps investors uneasy.

The kiwi traded at 67.15 US cents at 1pm in Wellington from 67.25 cents on Friday in New York. The trade-weighted index was at 73.62 from 73.74 last week.

The local currency washed around in abbreviated local trading after being sold off last week. The US Federal government shutdown and divisions in the White House with the accelerated exit of Secretary of Defense Jim Mattis over the decision to withdraw from Syria have heightened investors' nervousness about what impact politics and US foreign policy will have on global growth. Stocks on Wall Street fell on Friday, and the Volatility Index - known as Wall Street's 'fear gauge' - rose as high as 30.35, a level not seen since February and above a moving average of 23.14.

"There's a broad risk-off in the market," said Mitchell McIntyre, a trader at HiFX. "We're likely to see the kiwi continue to trade a little lower from here."

McIntyre said the local outlook is adding to the negative tone for the kiwi dollar, with last week's weaker than expected third-quarter GDP reading and proposed increase to bank capital requirements seen as building the case for the Reserve Bank to cut the official cash rate, which is already at a record low 1.75 percent.

The Asian trading session is set to be quiet with Japanese markets closed for a public holiday.

New Zealand's two-year swap rate increased 1 basis point to 1.98 percent and 10-year swaps were also up 1 basis point at 2.67 percent.

The local currency fell to 95.23 Australian cents from 95.51 cents on Friday in New York and traded at 74.56 yen from 74.76 yen. It decreased to 59.04 euro cents from 59.11 cents last week and was at 53.08 British pence from 53.11 pence. The kiwi declined to 4.6366 Chinese yuan from 4.6407 yuan last week.

(BusinessDesk)

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