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NZ dollar gains vs yen as BOJ reiterates commitment to stimulus, low rates

Monday 10th July 2017

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The New Zealand dollar rose against a broadly weaker yen after the Bank of Japan affirmed its commitment to its massive stimulus programme, highlighting the contrast to the US Federal Reserve intent on making its third interest rate hike this year.

The kiwi traded at 83.04 yen as at 5pm from 82.85 yen late Friday in New York. It was little changed at 72.76 US cents from 73.80 cents in New York.

Bank of Japan Governor Haruhiko Kuroda on Monday reiterated in a speech at a quarterly meeting of the central bank's regional branch managers that the central bank is resolved to maintain its massive stimulus program until inflation is stable above its 2 percent target, Reuters reported. That stands in sharp contrast to the outlook in the US where stronger-than-expected jobs growth has stoked expectations that the Fed will stick with its tightening plans this year.

"Yen weakness has been a bit of a story today but that's ongoing... It's pretty hard to be bullish on yen at the moment," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank. 

Looking ahead, Kelleher said central banks will continue to be in focus this week. with the Bank of Canada's interest rate decision due on Wednesday.

The kiwi slipped to a two-month low against the Canadian dollar after stronger-than-expected Canadian labour market figures on Friday and traded at 93.77 Canadian cents as at 5 pm today from 94.56 cents in Asia at the end of last week. 

With the OIS market pricing in a 95 percent chance of a 25 basis points hike to 0.75 percent in Canada, any surprise would see a swift move in the Canadian dollar, known as the loonie, Kelleher said. 

Federal Reserve chair Janet Yellen will give semiannual testimony before congressional committees this week, while data out of the US, including PPI and CPI figures later this week could add to the greenback's recent strength if there are any signs of inflation, said Kelleher. 

The trade-weighed index was at 78.21 versus 78.32 late Friday. The kiwi traded at 95.61 Australian cents from 95.75 cents in New York on Friday, as the Aussie benefited from an uptick in iron ore prices, said Kelleher. It was at 4.9482 yuan from 4.9512 yuan. It traded at 56.43 pence from 56.44 pence on Friday and 63.81 euro cents from 63.85 cents.

New Zealand's two-year swap rate rose 1 basis point to 2.32 percent, and 10-year swaps rose 2 basis points to 3.42 percent. 


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