NZ dollar steady, markets looking ahead to next week's US data

Friday 23rd June 2017

The New Zealand dollar was largely unchanged, holding the gains it made when the central bank held rates steady Thursday and - contrary to expectations - was relatively sanguine about the kiwi's strength.

The kiwi was trading at 72.67 as at 5pm from 72.63 US cents as at 8am in Wellington from 72.52 cents late yesterday. The trade-weighted index rose to 78.44 from 78.25.

Tim Kelleher, head of institutional foreign exchange sales at ASB Bank, said he was surprised there wasn't more follow through after the central bank's statement. Governor Graeme Wheeler kept the benchmark rate unchanged at 1.75 percent and said a lower New Zealand dollar would help rebalance the growth outlook towards the tradables sector.

"I would have thought the kiwi would have tested higher, but it may be running into sellers around these levels," said Kelleher.

He said trading, however, was very quiet as month- and year-end approach for several of banks. The northern hemisphere summer may also be sidelining investors, he said.

Looking ahead, he said markets will be looking at new home sales data overnight in the US and flash PMI data, ahead of a raft of releases next week, including gross domestic product data and core PCE price index data.

Domestically next week will bring international trade figures and building consents data and "we suspect that both will provide some signs that GDP growth in the second quarter will beat the first quarter’s 0.5 percent quarter-on-quarter," Capital Economics chief Australia & New Zealand economist Paul Dales said.

On a lighter note, Dales said if the relative performance of the economies of New Zealand and the UK-Ireland over the next few years is anything to go by, the All Blacks will beat the British & Irish Lions 2-1 in the rugby test series. According to Dales, "in our three economic tests, New Zealand come out on top for growth and inflation, but falls short in the third test as interest rates will stay lower for longer and the New Zealand dollar will weaken against the pound."

The kiwi traded at 57.20 British pence from 57.22 pence and rose to 80.90 yen from 80.55 yen. It rose to 4.9719 yuan from 4.9530 yuan and gained to 65.09 euro cents from 64.91 cents. The kiwi dollar rose to 96.19 Australian cents from 96 cents late yesterday.

New Zealand's two-year swap rate was unchanged at 2.20 percent while the 10-year swap rate fell 1 basis point to 3.13 percent.

(BusinessDesk)

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