NZ dollar falls to three-week low

Wednesday 5th April 2017

The New Zealand dollar fell, touching a three-week low, with traders reluctant to push the currency higher ahead of US President Donald Trump's summit with his Chinese counterpart Xi JinPing and US non-farm payrolls data on Friday.

The kiwi traded at 69.72 US cents at 5pm in Wellington, having touched a three-week low of 69.65 cents overnight, from 69.87 cents late yesterday. The trade-weighted index slipped to 75.86 from 75.93.

The local currency barely budged after the results of the GlobalDairyTrade auction overnight showed the second straight gain in prices, with whole milk powder rising 2.4 percent. That was followed by the release of the ANZ Commodity Price Index today, which rose 0.4 percent in March, led by meat and wool. North Korea and trade are likely to be on the agenda for Trump's meeting with Li, and the renegade state underlined its strategic position by test-firing a ballistic missile into the sea off its east coast today.

Traders said that gains in commodity prices aren't seen stoking the kiwi at a time the Reserve Bank governor Graeme Wheeler's preference is to keep its key interest rate at a record low, while the US Federal Reserve potentially has two hikes up its sleeve this year, even if the so-called Trump trade - where his policies were seen driving up US inflation and interest rates - has been on the wane.

"The kiwi really hasn't found a sustained 'bid' since the Reserve Bank (monetary policy) statement in February, when Wheeler suggested we will see just one hike between now and 2020," said Nick Tvedt, a currency dealer at HiFX.

Tvedt said there is support for the New Zealand dollar if it falls as low as 69 US cents.

The kiwi dollar has fallen from as high as 73.74 US cents in early February, with the decline hastened by Reserve Bank governor Graeme Wheeler's reminder to the market that interest rates are expected to remain low for the foreseeable future.

The latest QV House Price Index from government-owned Quotable Value, released this morning, shows that while national property values increased on average by 12.9 percent over the year to March 31, the increase in the last three months was just 0.6 percent. QV said the slowdown in the pace of house price inflation in the first three months of this year may reflect lending restrictions imposed by the Reserve Bank last year.

The local currency traded at 92.07 Australian cents from 92.13 cents yesterday. It traded at 77.10 yen from 77.14 yen yesterday and fell to 4.7971 Chinese yuan from 4.8086 yuan. It declined to 65.27 euro cents from 65.45 cents and was little changed at 55.98 British pence from 56.01 pence.

New Zealand's two-year swap rate rose one basis point to 2.26 percent, and 10-year swaps declined one basis point to 3.32 percent.

(BusinessDesk)

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