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NZ dollar gains against greenback ahead of OCR review

Thursday 25th October 2012

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The New Zealand dollar gained against the greenback ahead of the first official cash rate review from new Reserve Bank governor Graeme Wheeler and after the Federal Reserve reiterated that the US economy is expanding at a moderate pace.

The kiwi dollar traded at 81.59 US cents from 81.26 cents at 5pm in Wellington yesterday. The trade-weighted index rose to 72.85 from 72.58.

Wheeler is expected to jeep the OCR unchanged at 2.5 percent though traders want to see whether he signals there's room to cut interest rates given inflation is tame and economic growth still mild. Fed policy makers said US "economic activity has continued to expand at a moderate pace in recent months." However, the path forward isn't yet clear. "Growth in employment has been slow, and the unemployment rate remains elevated."

"No rate change is expected but the market is eagerly awaiting the announcement (from Wheeler) to get a feel for his overall style, thoughts and possible approach," Bancorp Treasury Services said in a note to clients.

Traders are pricing in a quarter point cut in the OCR by March next year.

The kiwi dollar rose to 69.92 euro cents from 62.53 cents and slipped to 50.87 British pence from 50.96 pence. It traded at 78.90 Australian cents from 78.73 cents and rose to 65.07 yen from 64.88 yen.

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