Monday 7th August 2017
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The New Zealand dollar was largely unchanged, capped by expectations the central bank may be more dovish on Thursday and by a strong rebound in the US dollar after solid jobs data overnight Friday.
The kiwi dollar traded at 73.99 US cents as at 5pm in Wellington from 73.98 US cents as at 8am and little changed from Friday in New York. The trade-weighted index was at 77.93 from 78.04.
"We have basically maintained the losses we got hit with on Friday night as a result of the strong payrolls data," said Westpac Bank Senior FX Strategist Imre Speizer. He said the central bank's survey of inflation expectations Monday just added to the view that the central bank will keep rates on hold at 1.75 percent on Thursday and could even indicate it is planning to keep rates on hold for even longer than it previously forecast.
The Reserve Bank's survey of expectations showed respondents see annual inflation at 1.77 percent in one year, down from 1.92 percent rate in the prior survey three months ago. In two years it is seen at 2.09 percent, down from 2.17 percent.
The survey confirmed "come Thursday they will sit on their hands, keep repeating they are going to do so for a long time. There is a case for them to be slightly more dovish this time around," said Speizer.
In its May monetary policy statement, the central bank's forecasts indicated that rates would remain on hold until September 2019. Since then inflation and growth have been lower than the RBNZ expected. As a result, speculation is growing that the central bank could signal the first rate hike may now come in 2020.
"That's what is keeping a lid on the kiwi, as well as the US dollar rebound," he said.
The US dollar index rallied after Labor Department figures showed nonfarm payrolls rose by 209,000 jobs in July, beating estimates of a 180,000 gain, while average hourly earnings rose a modest 0.3 percent. US inflation data is released at the end of the week.
The kiwi was trading at 93.20 Australian cents from 93.50 cents in New York on Friday. It shed some ground after Australian job advertisements rose for a fifth straight month but trading was thin due to a bank holiday in New South Wales. It was at 56.65 British pence from 56.81 pence and was at 4.9740 yuan from 4.9828 yuan. It dipped to 62.72 euro cents from 62.90 cents and traded at 81.90 yen from 81.98 yen.
New Zealand's two-year swap rate was unchanged at 2.17 percent while the 10-year swaps rose 2 basis point to 3.21 percent.
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