You are using an older browser version. Please use a supported version for the best MSN experience.

Kiwi little changed ahead of rate review

NZN 10/05/2017 Paul McBeth

The New Zealand dollar was little changed near US69c ahead of the Reserve Bank's monetary policy review on Thursday, where Reserve Bank governor Graeme Wheeler may bring forward the track of interest rate hikes.

The kiwi traded at US69.01c as at 5pm in Wellington from 68.95c at 8am and 69.02c Tuesday.

Mr Wheeler is expected to keep the official cash rate at 1.75 per cent at Thursday's policy review, however building inflation expectations and a bigger pick-up in consumer prices than anticipated has some economists predicting he'll bring forward future increases to 2018.

"The market's mixed on whether the Reserve Bank's statement is going to recognise some of the better data we've had and bring the OCR track from 2019 to late 2018," said Martin Rudings, senior dealer foreign exchange at OMF in Wellington.

"I don't think the market's willing to take too many risks going into it."

Mr Ruding's personal view is that Mr Wheeler will stick to his current track, looking through the one-off inflationary boosts from the first quarter, with growing trade protectionism still a threat.

If that happens, he expects the kiwi will fall against the Australian dollar, which has been languishing in recent days with weak iron ore prices and disappointing economic data. The kiwi edged down to A93.70c from 93.80c Wednesday.

The prospect of higher US interest rates is still the dominant theme for Mr Rudings, with two more interest rate hikes expected from the Federal Reserve, which would reduce the yield appeal of the antipodean currencies.

The yield on New Zealand's 10-year government bond was recently at 3.09 per cent, 70 basis points above its US counterpart.

The kiwi declined to 4.7627 Chinese yuan from 4.7662 yuan. The local currency rose to 78.51 yen from 78.17 yen, and increased to 63.35 euro cents from 63.11 cents. It was unchanged at 53.28 British pence.

image beaconimage beaconimage beacon