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NZ dollar drifts higher as Trump bemoans rate hikes

Tuesday 21st August 2018

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The New Zealand dollar drifted higher in quiet trading as investors latched on to reports US President Donald Trump complained of the Federal Reserve's interest rate hikes. 

The kiwi traded at 66.37 US cents as at 8am in Wellington from 66.22 cents yesterday. The trade-weighted index was at 71.83 from 71.79 yesterday. 

Central bankers will converge at Jackson Hole, Wyoming this week at their annual conference, where Fed chair Jerome Powell is scheduled to speak. The Fed has been raising interest rates and winding back quantitative easing as it brings monetary policy back to a more normal setting as the US economy accelerates under the stimulus of President Trump, who told Reuters the US central bank should support growth, saying "I'm not thrilled with his raising of interest rates". 

The Fed's trajectory is at odds with New Zealand and Australia, where both central banks expect to keep their benchmark rates unchanged for the foreseeable future. 

"This follows Trump’s interview with CNBC last month where he commented he was 'not thrilled' with rate increases, breaking with the tradition of Presidents avoiding direct comments on monetary policy that put into question the Fed’s independence," Bank of New Zealand senior markets strategist Jason Wong said in a note. "The NZD was in a drift-down mode for much of Monday and reached an overnight low of 0.6611 and a turnaround in the USD’s performance sees it closer to 0.6630 this morning."

Local data today include July migration and tourism numbers and credit card spending and balances. Across the Tasman, Minutes to the Reserve Bank of Australia's last policy review come out today and governor Philip Lowe will also give a speech in Canberra. The kiwi traded at 90.49 Australian cents from 90.60 cents yesterday. 

Traders had been focused on emerging markets for much of last week after Turkey's lira sank by as much as a quarter in one session on fears its high level of foreign indebtedness could trigger a financial crisis. That focus hasn't persisted into this week, with Venezuela's attempts to rein in skyrocketing inflation by devaluing the bolivar and preparing to raise the minimum wage 3,000 percent. 

"The Venezuelan Bolivar was devalued by 95 percent, showing that there are worse basket cases than Turkey," Wong said. The bolivar was recently at 248,209.9219 per US dollar. 

The kiwi rose to 4.5494 Chinese yuan from 4.5344 yuan yesterday and traded at 73.10 yen from 73.26 yen. It traded at 57.83 euro cents from 57.95 cents yesterday and was little changed 51.90 British pence from 51.95 pence. 


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