NZ dollar holds near 3 1/2-month low on higher US bond yields; ECB awaited

Thursday 26th April 2018

The New Zealand dollar held near a 3 1/2-month low as rising US bond yields underpinned demand for the greenback, reducing the allure of the kiwi, and ahead of the European Central Bank's latest policy review.

The kiwi traded at 70.56 US cents as at 5pm in Wellington from 70.66 cents at 8am, down from 70.94 cents yesterday. The trade-weighted index dropped to 73.28 from 73.35.

The greenback tracked higher as the yield on the US 10-year Treasury rose above 3 percent for the first time in four years, boosting the appeal of the world's reserve currency, and trumping fears associated with political uncertainty attached to the White House. Higher yields for longer-dated US debt coincide with the Federal Reserve expected to keep raising short-term interest rates this year, in contrast to the European Central Bank which is likely to refrain from making any policy changes at the upcoming review.

"The kiwi and Aussie started the day on their lows - had a little bit of a tiny bounce with a bit of demand for exporters who came in and saw these new levels, but it looks like there's a bit more downside to them," said Martin Rudings, senior dealer foreign exchange at OMF. "Maybe there'll be no respite for the kiwi until a positive dairy auction next week, but it's a US dollar story, and when you look at the long-dated charts for the dollar index, this move could only just be the beginning."

New Zealand's two-year swap rate rose 2 basis points to 2.29 percent and 10-year swaps gained 3 basis points to 3.3 percent.

The kiwi fell to 57.69 euro cents from 58.03 cents yesterday and traded at 50.61 British pence from 50.75 pence.

The local currency fell to 93.19 Australian cents from 93.60 cents yesterday and declined to 4.4625 Chinese yuan from 4.4706 yuan. The kiwi traded at 77.15 yen from 77.30 yen yesterday.

(BusinessDesk)

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