Tuesday 8th September 2015 |
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The New Zealand dollar fell as traders bet the Reserve Bank will cut interest rates this week, and mid concern an El Nino weather pattern may further dent the slowing economy.
The kiwi slipped to 62.57 US cents at 8am in Wellington, from 62.67 cents at 5pm yesterday on lower volumes due to the US Labor Day holiday on Monday. The trade-weighted index declined to 68.41 from 68.54 yesterday.
Traders have put 78 percent odds of Reserve Bank governor Graeme Wheeler cutting the official cash rate a quarter point to 2.75 percent on Thursday, as economic growth slows following a slump in dairy prices, the nation’s largest export commodity. Concern is also mounting that an El Nino weather pattern may cause a drought this summer, weighing on agricultural production and economic growth.
"This week is all about the RBNZ," said OMF senior dealer, foreign exchange, Stuart Ive. "The kiwi is clearly suffering from pre-OCR nerves so the pressure remains. The market is fully expecting Governor Wheeler to cut by 25 basis points and come out with a dovish statement afterwards.
"The market is very much focused now on this growing El Nino effect. There does appear to be a growing momentum behind that at the moment. It's a negative for the country. That means that the kiwi dollar remains under pressure."
OMF's Ive said the potential for drought is likely to be "on the radar" of the Reserve Bank and could be raised as a concern on Thursday.
The kiwi has support at 62.35 US cents and faces resistance at 62.80 cents, Ive said.
In New Zealand today, data is released on second-quarter manufacturing, which will help economists firm up their expectations for GDP over the period.
This afternoon, all eyes will be on Chinese August trade data. Weak import data would probably weigh on the kiwi and the Aussie, Ive said.
The New Zealand dollar slipped to 90.28 Australian cents from 90.54 cents yesterday. In Australia today, the NAB August business confidence survey is published and Reserve Bank of Australia head of financial stability Luci Ellis is speaking on 'Property Markets and Financial Stability' in Sydney.
The kiwi fell to 56.03 euro cents from 56.24 cents yesterday ahead of the release of the second estimate of Eurozone GDP.
The local currency declined to 40.96 British pence from 41.25 pence yesterday, edged lower to 74.66 yen from 74.84 yen, and dropped to 3.9822 yuan from 3.9905 yuan.
BusinessDesk.co.nz
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