NZ dollar climbs from 4-year low before RBA, dairy auction

Monday 2nd February 2015

The New Zealand dollar rose from a four-year low ahead of key data that may provide more insight into the relative strength of the nation's economy compared to its trading partners.

The kiwi rose to 72.69 US cents, having fallen as low as 72.13 cents, from 72.58 cents at the New York close on Friday. The trade-weighted index and 72.80 cents at 5pm in Wellington on Friday. The trade-weighted index was little changed at 75.55 from 75.54 on Friday.

The kiwi dollar tumbled after the Reserve Bank last week moved to a neutral bias in the face of weak inflation, giving some traders cause to start pricing in a cut in interest rates. The Reserve Bank of Australia reviews interest rates tomorrow, with the prospect of rate cuts already priced in by traders and Wednesday morning will deliver the results of the latest GlobalDairyTrade auction, which will show if New Zealand's biggest export commodity has bottomed out.

Employment figures for the fourth quarter is also due Wednesday, as is an on-the-record speech by central bank governor Graeme Wheeler, which may include a signal about how well the market reacted to last week's review. The week rounds out with US non-farm payrolls.

The kiwi "is largely waiting for the RBA review, dairy auction, employment data, then US non-farm payrolls at end of the week," said Dan Bell, head of corporate sales at HiFX. "It's a pretty quiet Asian session looking for more focus from the offshore guys. It does feel like a moment of consolidation is due for the US dollar which has been on a one-way track over the last few weeks."

The US Dollar Index, which measures the greenback against a basket of major currencies, is near its highest levels in more than a decade.

Weighing on the kiwi was the release over the weekend of Chinese manufacturing data which signalled the first contraction in more than two years. The Chinese government’s purchasing managers’ index fell to 49.8 in January from 50.1 in December and below the 50.2 expected.

The New Zealand dollar may extend its decline this week, based on a BusinessDesk survey of 12 currency traders and strategists. Seven expect the currency to fall, while two say it may rise and three bet it will remain broadly unchanged.

The New Zealand dollar was little changed at 93.52 Australian cents from 93.48 cents on Friday ahead of the Reserve Bank of Australia's decision on interest rates tomorrow. The local currency was little changed at 64.26 euro cents from 64.27 cents on Friday, traded at 48.20 British pence from 48.30 pence and fell to 85.60 yen from 85.91 yen.

BusinessDesk.co.nz

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