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NZ dollar gains as investors prepare for Bank of Japan policy tweaks

Tuesday 31st July 2018

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The New Zealand dollar rose as investors look ahead to the Bank of Japan meeting where they expect governor Haruhiko Kuroda to amend the extraordinary stimulus policy in a week dominated by central bank reviews. 

The kiwi advanced to 68.20 US cents as at 8am in Wellington from 67.93 cents yesterday The trade-weighted index increased to 73.30 from 73.17. 

The US dollar index, a measure of the greenback against a basket of currencies, fell 0.4 percent ahead of the Bank of Japan meeting, which is expected to see a change in its massive stimulus programme to allow for greater swings in interest rates and a wider stock-buying initiative. The Japanese central bank review comes ahead of the Federal Reserve and Bank of England meetings, which are expected to continue the trend among large monetary authorities to looser policy. 

"It seems that the BoJ would be happier to see long-term rates increase but it doesn’t want to see a concurrent appreciation of the yen. It’s a difficult balancing act and the central bank will need to get its messaging right," Bank of New Zealand senior markets strategist Jason Wong said in a note. "The USD is weaker across the board as the new week begins, supporting a lift in the NZD towards the top of its recent range."

Local data today include the ANZ Roy Morgan business confidence survey and July building consents, while the Chinese manufacturing PMI is also in view. The kiwi rose to 92.09 Australian cents from 91.90 cents yesterday. 

US trade policy has also been a major feature for currency markets, and US Commerce Secretary Wilbur Ross indicated negotiations with Mexico's President-elect Andres Manuel Lopez Obrador are moving quickly and are close to being completed. That follows comments from US trade representative Robert Lighthizer last week that NAFTA talks are in the "finishing stages". 

The kiwi rose to 75.73 yen from 75.44 yen yesterday and traded at 4.6439 Chinese yuan from 4.6434 yuan. It edged up to 51.93 British pence from 51.85 pence yesterday and was almost unchanged at 58.26 euro cents from 58.27 cents. 


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