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Kiwi steady on US rate hike divide

NZ NewswireNZ Newswire 17/08/2016

The New Zealand dollar is little changed above US72 cents after minutes of the last Federal Reserve meeting showed US policymakers divided on the timing of rate hikes.

The kiwi traded at US72.47 cents as at 8am on Thursday in Wellington, from US72.52c late on Wednesday.

It rose to as high as US72.69c immediately after the Fed minutes were released before giving up most of the gains. The trade-weighted index was at 76.61 from 76.68.

The Federal Open Market Committee minutes showed that while some members favoured an early hike in interest rates, others wanted to wait for the flow of data to determine whether inflation was likely to pick up before raising rates.

Traders are now expecting no move from the Fed until at least December.

By contrast, fundamentals remain robust for the kiwi, with a surge in dairy prices yesterday, signs of an improving labour market and an interest rate premium that's still sufficient to draw investors.

"Growth remains a key currency fundamental and New Zealand has it," said ANZ chief economist Cameron Bagrie.

"Specific local currency support was seen in spades yesterday. That support is not set to change anytime soon and equals a strong - though not necessarily stronger - currency. USD direction still key and the Fed is in data-watch mode."

In New Zealand on Thursday, traders will be watching for the ANZ Roy Morgan Consumer Confidence for August while across the Tasman, labour market data is due out.

In the morning the kiwi had risen to 94.71 Australian cents from A94.54c on Wednesday It fell to 72.63 yen from 73.14 yen and slipped to 64.17 euro cents from 64.54c. It dropped to 55.54 British pence from 55.67p and rose to 4.8061 yuan from 4.8087 yuan.

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