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NZ dollar holds above 73 US cts ahead of Fed chair Powell testimony as US rates in view

Tuesday 27th February 2018

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The New Zealand dollar held above 73 US cents ahead of Federal Reserve chair Jerome Powell's debut testimony to Congress, where investors will be seeking hints on the future track for interest rates. 

The kiwi traded at 73.09 US cents as at 8am in Wellington from 73.18 cents yesterday. The trade-weighted index was at 74.96 from 75 yesterday. 

Stocks on Wall Street gained, with the Dow Jones Industrial Average recently up 1.4 percent, and the yield on US 10-year Treasuries was at 2.86 percent with investors expecting the Fed to hike the federal funds rate three times this year. Powell appears before the House Financial Services Committee on Tuesday, and investors will be looking to see whether his comments and answers to questions hold the Fed's official line that rate hikes will be gradual. Before that testimony, Fed vice chair Randal Quarles is speaking about the US economy. 

"Recent correlations suggest that more hawkish comments from Powell and increases in Treasury yields will push equities lower, and vice versa for a dovish testimony," Bank of New Zealand interest rate strategist Nick Smyth said in a note. "There was no obvious driver for the intraday moves in the FX market, with the likely explanation being pre-Powell positioning among investors."

Local data today include January overseas merchandise trade figures, which are expected to show a shrinking annual trade deficit of $2.7 billion, while across the Tasman, investors will keep tabs on the ANZ-Roy Morgan consumer confidence survey. The kiwi traded at 93.08 Australian cents from 93.10 cents yesterday.

The local currency edged up to 52.34 British pence from 52.28 pence yesterday and traded at 59.37 euro cents from 59.43 cents. It rose to 78.19 yen from 77.96 yen yesterday, and fell to 4.6131 Chinese yuan from 4.6204 yuan. 

(BusinessDesk)

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