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NZ dollar treads water, but 'short squeeze' possible from US data

Monday 30th July 2018

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The New Zealand dollar tread water as financial markets await a raft of events, including several central bank announcements, US data and local employment data. 

The kiwi traded at 67.93 US cents at 5pm versus 67.92 US cents at 8am in Wellington and 67.87 cents on Friday in New York.  The trade-weighted index was at 73.17 from 73 last week.

Investors are awaiting upcoming central bank meetings in the US, UK and Japan, with the Bank of Japan's Wednesday meeting of particular interest, given speculation that lower bank profitability and muted inflation could see it rejig its yield curve control settings.

Investors expect the Bank of England will raise interest rates on Thursday, while the US Federal Reserve isn't expected to hike at this week's meeting and US jobs data at the end of the week will be a focus after second-quarter gross domestic product data was weaker than expected. 

Locally, tomorrow's business confidence data from ANZ Bank will be closely watched for signs of further weakness ahead of domestic jobs data Wednesday. Economists are tipping a steady second-quarter unemployment rate but some expect signs of wage inflation on a higher minimum wage and slowing migration.   

"The kiwi could be in for a short squeeze" if the US jobs numbers backed up a soft GDP read, said Ross Weston, a senior trader at Kiwibank. The kiwi could test resistance at around 68.60 US cents and if it breaks through that it could head toward 70 US cents. 

The kiwi traded at 91.90 Australian cents from  91.96 cents last week and at 75.44 from 75.46 yen on Friday in New York.

It was at 4.6434 Chinese yuan from 4.6279 yuan and traded at 51.85 British pence from 51.90 pence last week, and at 51.85 euro cents from 51.90 cents.

New Zealand's two-year swap rate were unchanged at 2.13 percent and 10-year swaps were unchanged at 3.02 percent.    


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