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Kiwi steady ahead of OCR announcement

NZ Newswire logoNZ Newswire 8/02/2017 Jonathan Underhill

The New Zealand dollar was little changed, holding just above US73 cents, ahead of a Reserve Bank statement that may project a higher track for interest rates than the steady-as-she-goes projection it gave three months ago.

The kiwi traded at US73.05c as at 8am on Thursday in Wellington from US73.04c late on Wednesday.

The trade-weighted index sat at 79.50, well above the 76.4 average level the RBNZ forecast in its November monetary policy statement, from 79.52.

The central bank is widely expected to keep rates on hold Thursday but the statement and forecasts will be closely scrutinised for any hints about when it might move to lift interest rates.

In November, governor Graeme Wheeler cut the official cash rate a quarter point to 1.75 per cent and forecast they would remain at that level until the end of 2019.

Since then, figures have confirmed that inflation is back within the bank's target range but Mr Wheeler is likely to be cautious about sending a signal to the market about raising interest rates for fear of driving the kiwi higher.

"Enough has changed that the bank's previous soft easing bias is no longer appropriate," said ANZ senior economist Sharon Zollner.

"Accordingly, we expect the rate track to be slightly higher, removing the small odds of another near-term OCR cut that it demonstrated previously.

"It is too early to start talking tough and resurrect a tightening bias. While inflation is rising, there is as yet no evidence that the momentum will not peter out again, as it has done before, wrong-footing the RBNZ."

On Thursday morning, the kiwi traded at 95.52 Australian cents from A95.64c on Wednesday. It traded at 58.32 British pence from 58.40p and was little changed at 68.30 euro cents from 68.35c. The kiwi traded at 81.85 yen from 81.87 yen and was at 5.0185 yuan from 5.0262 yuan.

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