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Kiwi steady as US wary of rate hike

NZ Newswire logoNZ Newswire 18/08/2016 Paul McBeth

The New Zealand dollar is little changed near US73 cents after the minutes of the Federal Reserve's last policy review showed little appetite for a rate hike in the near-term.

The kiwi traded at US72.91 cents at 8am on Friday in Wellington, from US72.88c on Thursday. The trade-weighted index was almost unchanged at 76.83 from 76.80.

The dollar index, a measure of the greenback against a basket of currencies, extended its decline to a near two-month low as investors appear reluctant to price in an increase in US interest rates.

The prospect of lower rates for longer helped push up stocks on Wall Street and in Europe and underpinned gains in commodity prices. That appetite for risk-sensitive assets and New Zealand's already wide interest rate differential is supporting demand for the kiwi.

"With the Fed in no apparent hurry to lift rates, or should we say not providing enough of a hat tip to the hawks (though data contingent of course), the lack of any inflationary smoking gun is the green light for a continuation of the carry trade," ANZ chief economist Cameron Bagrie said in a note, referring to the practice where investors borrow cheap money to buy higher-yielding assets.

"So it's little surprise to see the NZD trading well, bonds supported and the USD struggle."

On Friday morning, the local currency increased to 72.98 Australian cents from A72.92c on Thursday and rose to 4.8311 Chinese yuan from 4.8242 yuan. It fell to 64.14 euro cents from 64.40 cents and declined to 55.36 British pence from 55.78p. The kiwi edged down to 72.78 yen from 72.92 yen yesterday.

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