NZ dollar little changed as RBA holds the line, traders watch Greece

Tuesday 7th July 2015

The New Zealand dollar traded in a 20 basis point range in local trading as the Reserve Bank of Australia kept interest rates unchanged, and as markets continue to watch the fall-out from Greece's vote against adopting harsh austerity measures to access bail-out funds.

The kiwi was little changed at 66.61 US cents at 5pm in Wellington from 66.84 cents at 8am and 66.71 cents yesterday. It fell to 88.97 Australian cents from 89.20 cents yesterday.

The RBA kept the target cash rate 2 percent, saying "monetary policy needs to be accommodative" as growth remains below trend. Governor Glenn Stevens said the RBA will continue to monitor "economic and financial conditions" on whether the current level of support will stoke growth.

The central bank decision comes as investors continue to watch the posturing between Greece and its creditors after a referendum voted against adopting stricter austerity measures. The resignation of Greece's Finance Minister Yanis Vaoufakis is seen as paving the way for better relations between the Mediterranean nation and European policymakers, who will hold an emergency summit on Tuesday in Brussels. The kiwi was little changed at 60.38 euro cents from 60.49 cents yesterday.

"The market thinks there's enough stopgap measures in place to stop the world going to hell in a hand-basket, and it's awaiting what the ECB (European Central Bank) does and what the politicians do," said Imre Speizer, senior market strategist at Westpac Banking Corp in Auckland. "The kiwi's traded in an incredibly tight range."

New Zealand business confidence fell to its lowest level in three years in the New Zealand Institute of Economic Research's quarterly survey of business opinion, with firms increasingly downbeat on their own profitability. The survey doesn't cover the agricultural sector, which grew increasingly pessimistic in last week's ANZ Bank Business Outlook.

The slump in dairy prices and its deteriorating effect on the terms of trade prompted New Zealand's Reserve Bank to cut the official cash rate a quarter-point to 3.25 percent last month, and traders are pricing in a 98 percent chance of a cut at its July 23 review.

New Zealand's two-year swap rate increased to 2.94 percent at 5pm in Wellington form 2.93 percent yesterday, while the 10-year swap rate fell to 3.82 percent from 3.86 percent.

The local currency was almost unchanged at 4.1361 Chinese yuan from 4.1367 yuan yesterday as Chinese equity markets whipped around, with the Shanghai Composite Index down 3.2 percent in afternoon trading, having slumped 27 percent in the past month.

The kiwi dollar was little changed at 42.72 British pence from 42.89 pence yesterday, and traded at 81.70 yen from 81.63 yen yesterday.

BusinessDesk.co.nz

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