NZ dollar little changed on the week as US payrolls loom

Friday 2nd October 2015

The New Zealand dollar is largely unchanged against the greenback this week as improving local outlook eases fears of slowing growth, and as traders wait for US employment data, which will help them weigh up the timing and pace of looming Federal Reserve interest rate hikes.

The kiwi traded at 63.90 US cents at 5pm in Wellington from 63.84 cents on Friday in New York last week. It was little changed from 63.97 cents at 8am, and 64.08 cents yesterday. The trade-weighted index traded at 69.73 from 69.82 yesterday, and is heading for a 0.9 percent weekly gain.

The local currency rallied through the latter half of the week as rising dairy prices helped bolster flagging business sentiment, and provided traders with more confidence about the resilience of New Zealand's economy. Optimism over better-than-expected Chinese manufacturing PMI was tempered by a softer reading in the US. That sapped investors' appetite for risk-sensitive assets ahead of US non-farm payrolls, which will likely show the world's biggest economy added about 201,000 jobs last month.

"The Fed's employment mandate to get off zero (percent) has been met, it's more an argument for how quickly they get to neutral," said Sam Tuck, senior FX strategist at ANZ Bank New Zealand in Auckland. "Domestic drivers for New Zealand dollar weakness are easing, which will keep the kiwi on the stronger side versus our commodity brethren such as the kiwi/Aussie, but not in the kiwi/US."

Australian retail sales rose 0.4 percent in August, meeting economists' expectations, and turning around a decline in July. The kiwi traded at 90.98 Australian cents from 90.87 cents yesterday.

New Zealand commodity prices rose 5.5 percent in September, led by gains in dairy prices, according to the ANZ Commodity Price Index. The series snapped a five-month decline, and followed similar improvements in consumer and business confidence surveys.

The kiwi fell to 57.16 euro cents from 57.54 cents yesterday, and traded at 42.20 British pence from 42.37 pence. It declined to 76.69 yen from 77.10 yen yesterday, and slipped to 4.0614 Chinese yuan from 4.0760 yuan.

New Zealand's two-year swap rate fell about one-and-a-half basis points to 2.665 percent, and 10-year swaps declined one-and-a-quarter basis points to 3.4775 percent.

BusinessDesk.co.nz

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