NZ dollar falls in tight range with subdued volatility measures as dairy auction looms

The New Zealand dollar fell while continuing to trade in a narrow range as investors brushed off heightened uncertainty around North Korea and the Trump administration in the US and push stocks on Wall Street to new highs. 

The kiwi traded at 68.61 US cents as at 5pm in Wellington from 68.76 cents at 8am and 68.73 cents yesterday. The trade-weighted index was at 74.86 from 74.88. 

The Chicago Board Options Exchange's Volatility Index, known as Wall Street's 'fear gauge', is sitting near its lowest level in 10 years, while stock benchmarks on Wall Street have climbed to record highs, seemingly unperturbed by North Korea's hostile posturing and persistent questions about US President Donald Trump's ability to press ahead with major tax reform, new trade policies and an expanded infrastructure spend. 

"Given where things are going in North Korea and with Trump sacking people and looking at sacking more people, there's a lot of uncertainty," said Michael Johnston, senior trader at HiFX in Auckland. "The market is complacent and underpricing the potential for a major movement." 

Johnston said the kiwi dollar may push higher in the short term but will find it hard to break above 70 US cents, and he still expects the currency to decline over the longer term. 

New Zealand's two-year swap rate increased 2 basis points to 2.22 percent and 10-year swaps rose 1 basis point to 3.29 percent. 

Investors will be watching tonight's GlobalDairyTrade auction where the price of whole milk powder are expected to decline, according to futures pricing on the NZX. 

The local currency was little changed at 92.84 Australian cents from 92.85 cents yesterday after minutes to the Reserve Bank of Australia's last policy meeting showed the high level of household debt and a weak labour market were the central bank's main focus. 

The kiwi traded at 53.29 British pence from 53.25 pence yesterday and declined to 62.59 euro cents from 62.86 cents. It edged up to 78.09 yen from 77.91 yen traded at 4.7417 Chinese yuan from 4.7417 yuan.

(BusinessDesk)