NZ dollar little changed amid commodity rout as traders await RBNZ review

Wednesday 9th December 2015

The New Zealand dollar held steady, even as the currencies of other commodity-linked countries declined, as traders were reluctant to change their positions ahead of the Reserve Bank decision on interest rates tomorrow.

The kiwi was little changed at 66.32 US cents at 8am in Wellington, from 66.33 cents at 5pm yesterday. The trade-weighted index was at 72.21 from 72.15 yesterday.

Currencies of commodity producing currencies fell amid concerns about an oil supply glut after the Organisation of the Petroleum Exporting Countries agreed to keep production high despite depressed demand, and following weak Chinese trade data. The kiwi was immune to the weakness, remaining relatively stable as traders focus on the looming interest rate review.

"The one commodity that has escaped the rout is the kiwi," Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York, said in a note. "The New Zealand dollar was down only slightly in Asian and European trade and vastly outperformed the other antipodeans."

Some 21 of 24 economists polled by Reuters expect the Reserve Bank to cut the benchmark rate by a quarter point to 2.5 percent. Traders have increased their bets for a quarter point cut to 78 percent, from 68 percent at the start of the week, according to Thomson Reuters data.

"Tomorrow is the RBNZ meeting with most market participants anticipating a rate cut, but the most recent data from New Zealand has been surprisingly strong," said BK's Schlossberg. "Therefore there is a small, but very real chance that the RBNZ may choose to hold rates steady, which would provide the kiwi with an even bigger lift as it will remain the predominant carry trade in the advanced industrialised world."

The kiwi edged up to 4.2571 yuan from 4.2561 yuan yesterday. Today, traders will be eyeing Chinese November inflation and producer prices data after trade data for the month released yesterday showed exports fell 6.8 percent from a year earlier while imports tumbled 8.7 percent. China, the world's second-largest economy, is New Zealand's largest trading partner.

The New Zealand dollar advanced to 91.99 Australian cents, from 91.60 cents yesterday ahead of an Australian consumer confidence survey due out today.

The local currency slipped to 60.89 euro cents from 61.13 cents yesterday, advanced to 44.20 British pence from 44.09 pence, and edged lower to 81.56 yen from 81.67 yen

BusinessDesk.co.nz

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