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NZ dollar holds recent gains on greater risk appetite

Monday 4th February 2019

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The New Zealand dollar is little changed and holding recent gains after much better-than-expected US jobs numbers on Friday sent a powerful signal that it’s still worth buying riskier assets, such as the kiwi currency.

The kiwi was trading at 68.92 US cents at 5pm in Wellington from 68.91 at 8am. The trade-weighted index rose to 74.33 from 74.28.

“It’s successfully weathered a stronger US dollar after the better than expected non-farm payrolls data,” says Peter Cavanaugh, senior adviser at Bancorp Treasury Services.

Friday’s data showed US jobs rose 312,000 in December, almost double market expectations of 177,000.

Cavanaugh says the domestic currency has made significant gains against so-called “safe haven” currencies – ones investors tend to retreat to in times of stress – so far this year.

The New Zealand dollar has gained more than 2.6 percent against the US dollar this year and more than 4 percent against the Swiss franc.

Investors are now eyeing potential new leads with turnover light with China and much of Asia celebrating the Lunar New Year this week, Cavanaugh says.

The release at 6.10pm New Zealand time of Kenneth Hayne’s final report from his Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry could potentially impact currency trading, he says.

But given all the dire predictions and fears about what that report might contain, a positive surprise is more likely than not.

“So much of it’s already factored in and everybody’s got to the point of thinking it’s going to be this bad, there’s a potential for it to be taken positively,” Cavanaugh says.

The pundits are expecting everything from a ban on vertically integrated investment firms, to the banning of commissions paid to mortgage brokers and investment advisers, to recommendations to curtail top bankers’ fat pay packets.

And it’s possible Hayne may even recommend criminal charges against individual senior executives.

The New Zealand dollar was fetching 95.30 Australian cents from 95.09, 75.53 yen from 75.45, and was unchanged at 52.70 British pence. It was at 60.19 euro cents from 60.10 and 4.6463 Chinese yuan from 4.6463.

The two-year swap rate was at 1.9082 percent from 1.9000 at Friday’s close; the 10-year swap rate was at 2.5075 percent from 2.4900.


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