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Kiwi dollar firms on weak US retail data, capped by rate-cut expectations

Thursday 17th October 2019

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The kiwi got a slight lift from weaker US data but remains capped by expectations of a November rate cut.

The kiwi was trading at 62.86 US cents at 7:50 am in Wellington from 62.70 cents at 5 pm. The trade-weighted index was at 69.86 from 69.81.

The kiwi got a slightly lift when US retail sales fell 0.3 percent in September, the first fall in seven months. The slide raised fears that the slowdown in the US manufacturing sector could be impacting consumers and added to the view the US Federal Reserve may keep cutting interest rates.    

“There will be some concern that the buoyancy of the US consumer may be starting to crack. The data added to expectations that the FOMC may cut rates 25 basis points at the late October meeting,” said ANZ Bank FX/Rates strategist Sandeep Parekh.

Comments from Reserve Bank deputy governor Geoff Bascand at a Sydney conference yesterday had weighed on the kiwi. According to news reports, Bascand said there was a “reasonable prospect” for rates to go lower in New Zealand. The central bank is widely expected to cut rates by 25 basis point in November to a record low 0.75 percent.

Meanwhile, the kiwi remains very volatile against the British pound, which is getting pushed around by Brexit headlines as the European Union and the UK scramble to finalise an agreement ahead of the EU Summit Thursday in Brussels.

The pound surged when EU sources said a deal was imminent but lost ground on headlines saying more time was needed. The kiwi was trading at 48.99 British pence from 49.15 British pence. It touched a low of 48.61 British pence overnight. 

The New Zealand dollar was trading at 92.93 Australian cents from 93.10 and was at 56.76 euro cents from 56.83, at 68.36 yen from 68.13, and at 4.4898 Chinese yuan from 4.4485.


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