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NZ dollar rises, an outlier amid rising Gulf tensions

Monday 22nd July 2019

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The New Zealand dollar was firmer but well within its recent range as the market focuses on escalating tensions in the Middle East after Iran seized a British-flagged tanker.

The kiwi was trading at 67.74 US cents at 5pm in Wellington from 67.62 at 8am and 67.61 late Friday in New York. The trade-weighted rose to 74.05 points from 73.89.

The Guardian newspaper reported signs that Iran is preparing for a long standoff and that British Foreign Secretary Jeremy Hunt is being pressured to join US-led plans for an international maritime protection force in the Persian Gulf.

The kiwi's gain was despite those tensions encouraging many to flee for the safety of the greenback.

“It’s only the New Zealand dollar that has moved over the course of this afternoon and it’s not a substantial move, about 15 points," says Mike Shirley, a dealer at Kiwibank. "It’s just a wobble in the scheme of things. There’s no easily identifiable driver of the lift.” 

There aren’t a lot of potential drivers on the immediate horizon either, Shirley says.

One potential market mover is that Reserve Bank of Australia Philip Lowe is scheduled to give a speech on Thursday on inflation targeting and economic welfare.

Given recent history, “you can’t discount any central bank speech – it could be a short-term game-changer,” Shirley says.

Last week, the New York Federal Reserve President John Williams managed to roil markets when he said that central banks should act quickly to lower rates at the first sign of economic distress.

His words were widely interpreted as a signal that the Federal Open Market Committee will slash interest rates at its next meeting on July 31.

But the New York Fed later clarified that Williams was talking about 20 years of academic research and wasn’t intending any messaging about the upcoming FOMC meeting.

The New Zealand dollar was trading at 54.18 British pence from 54.02, at 96.22 Australian cents from 95.97, at 60.39 euro cents from 60.29, at 73.11 yen from 72.86, and at 4.6589 Chinese yuan from 4.6531.

The New Zealand two-year swap rate edged down to 1.3166 percent from 1.3248 on Friday while the 10-year swap rate fell to 1.7575 percent from 1.7600.


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