Sharechat Logo

NZ dollar rises on Brexit hopes, rate cut reassessment

Friday 18th October 2019

Text too small?

The New Zealand dollar rose with hopes that Britain and Europe may agree on a Brexit deal and after China confirmed it continues to work on a preliminary trade deal with the US.

The local currency also outperformed as traders reassessed recent positive economic news and decided the Reserve Bank's next rate cut, expected in November, may be its last for a while.

The kiwi was trading at 63.69 US cents at 5pm in Wellington from 63.47 cents at 7:50am. The trade-weighted index was at 70.52 points from 70.28.

British Prime Minister Boris Johnson and European Commission President Jean-Claude Juncker announced they had reached agreement but the Brexit deal still requires Britain's parliament to support it.

Johnson needs 320 votes and his Conservative Party has only 287 seats. Conservative ally, the Northern Ireland Democratic Unionist Party, which has 10 seats, has said it can't support the deal.

A spokesman for China's Ministry of Commerce, Gao Feng, has said China will continue to increase purchases of US farm products as part of the "phase one" tentative deal agreed last week.

US President Donald Trump and China's President Xi Jinping are expected to sign the deal at the Asia-Pacific Economic Co-operation summit in Chile in mid-November.

"The kiwi did outperform other currencies during the afternoon. My guess is that the market's reassessing the chances for another easing from the Reserve Bank after November in light of fairly strong non-tradeables inflation, the pick-up in house prices, and commodity prices which are also holding up quite well," says Imre Speizer, currency strategist at Westpac.

"Dairy prices have risen gradually over the last few months, meat prices are elevated and overall commodities are basically holding up well," Speizer says.

"It doesn't point to a Reserve Bank needing to go below 0.75 percent."

The bank's official cash rate currently stands at 1 percent and the market is expecting it to cut to 0.75 percent at its monetary policy committee's next meeting on Nov. 13.

The outcome of the Brexit deal vote over the weekend will be crucial in determining how the New Zealand currency trades next week, Speizer says.

The New Zealand dollar was trading at 93.24 Australian cents from 93.00, at 49.55 British pence from 49.33, at 57.24 euro cents from 57.06, at 69.12 yen from 68.98, and at 4.5064 Chinese yuan from 4.4932

The two-year swap rate edged up to a bid price of 0.9303 percent from 0.9035 yesterday while the 10-year swaps rose to 1.3275 percent from 1.3025.


  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Gold Edges Higher After IMF Shaves World Growth Forecast
PaySauce to raise $5.8m, convert notes to equity
Phase One Trade-Deal is an improvement with noteworthy limitations
21st January 2020 Morning Report
Dollar Trims Gain on French Tariff Deal; Oil Rises
Finzsoft blocked from quitting credit unions contract over Christmas
China Unveils Plan to Reduce Single-Use Plastic by 2025
20th January 2020 Morning Report
Rio Tinto reiterates Tiwai position as aluminium prices stay weak
TIL downgrades earnings by up to 40%, suspends first-half dividend

IRG See IRG research reports