NZ dollar sheds 2.1% vs greenback over week as market looks to Fed rate hike

Friday 3rd March 2017

The New Zealand dollar is headed into the end of the week down 2.1 percent against the greenback and down 1.4 percent on a trade-weighed index basis as the market is now firmly of the view the US Federal Reserve will lift rates in mid-March.

The kiwi dollar fell to 70.37 US cents as at 5pm from 70.54 US cents as at 8am and 71.33 cents late yesterday. It opened the week at 71.90 US cents. The TWI fell to 77.15 from 78.23 at the beginning of the week and 77.90 late yesterday.

ANZ Bank New Zealand senior economist Philip Borkin said the market was initially uncertain about whether the Fed would move this month but after solid data and a raft of Fed speakers "all singing from the same song sheet," it is now pricing in a 90 percent chance of a rate hike.

Fed governor Lael Brainard, New York Fed president William Dudley and San Francisco Fed president John Williams have all indicated a rate hike is possible recently and the fact that "markets have embraced that" makes it even easier for the Fed to move, said Borkin.

Investors will be focused on a speech by Fed chair Janet Yellen later in the global trading day but she is expected to also signal that March is live, he said.

Borkin noted there was little movement against other currencies such as the Australian dollar: "It's really a US dollar story."

The New Zealand dollar traded at 93.12 Australian cents from 93.18 cents. The local currency was at 57.33 British pence versus 58.10 pence and at 66.86 euro cents compared with 67.73 cents. It was at 80.32 yen from 81.28 yen and 4.8541 yuan from 4.9096 yuan.

The two-year swap rate was unchanged at 2.30 percent and 10-year swaps were unchanged a 3.49 percent.

BusinessDesk.co.nz

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