NZ dollar edges back above US68c ahead of business confidence survey

Tuesday 18th December 2018

The New Zealand dollar edged back above 68 US cents ahead of today's local business confidence survey, which has remained in the doldrums despite relatively robust economic growth.

The kiwi traded at 68.02 US cents as at 8am in Wellington from 67.91 cents yesterday, remaining in a tight range as the US Federal Reserve last policy meeting of the year looms. The trade-weighted index was at 74.41 from 74.38 yesterday.

Local data today include the ANZ business confidence survey which has showed persistent pessimism among firms since the Labour-led coalition government was formed last year. That's despite economic growth holding up in an increasingly volatile global environment. Third-quarter gross domestic product figures on Thursday are the major domestic event of the week and are expected to show the economy grew at an annual pace of 2.8 percent. A GlobalDairyTrade auction overnight will also be watched.

However, the Federal Open Market Committee's policy statement and accompanying interest rate track are the main global event overshadowing the domestic environment. Fed chair Jerome Powell is expected to announce another increase in the federal funds rate on Thursday, while dropping a reference to further gradual hikes. Investors are also wary of a potential partial shutdown of the US Federal government over the White House's plans to build a wall on the US-Mexico border.

"We expect Fed officials’ median interest rate forecast for next year to decline from three hikes to two hikes, which would reinforce the notion that Fed might 'pause' its tightening cycle in March," Bank of New Zealand interest rate strategist Nick Smyth said in a note. "The NZD is little changed from this time yesterday and has remained within a narrow US$0.6785–0.6820 range."

The kiwi traded at 94.75 Australian cents from 94.61 cents yesterday, with minutes to the Reserve Bank of Australia's policy review earlier this month on the radar.

The local currency fell to 76.68 yen from 77.05 yen yesterday and increased to 4.6908 Chinese yuan from 4.6837 yuan. It traded at 53.89 British pence from 53.97 pence yesterday and decreased to 59.91 euro cents from 60.03 cents.

(BusinessDesk)

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