NZ dollar gains as commodities rally on speculation oil producers will curb supply

Tuesday 9th August 2016

The New Zealand dollar joined other commodity-linked currencies in rising on speculation oil producers will limit global supply.

The local currency rose to 71.36 US cents at 8am in Wellington from 71.11 cents yesterday. The trade-weighted index advanced to 75.86 from 75.61 yesterday.

The price for Brent crude oil rose on speculation members of the Organisation of the Petroleum Exporting Countries would consider joint action to reduce production if prices continue to slide. The Thomson Reuters/CoreCommodity CRB index, a broad measure of prices for raw materials, rose 0.5 percent, helping spur demand for commodity-sensitive currencies such as the kiwi and Australian dollar.

"Oil prices gained 3 percent after the Opec President said that an informal meeting between Opec will occur during next month’s IEF (International Energy Forum) meeting and that the current lull in prices is 'only temporary'," ANZ Bank New Zealand senior rates strategist David Croy said in a note.

The kiwi's rally comes ahead of Thursday's Reserve Bank policy review, where governor Graeme Wheeler is expected to cut the official cash rate at least a quarter-point to 2 percent and lower the projected track for future rates in a bid to drag down the kiwi dollar and reduce the deflationary impact of cheap imports.

ANZ's Croy said the Reserve Bank may be able to cap the New Zealand dollar if it's prepared to show a lower track for the OCR, "but with so much easing already priced in, and growth accelerating, we struggle to be outright bearish."

Government data today will show consumer spending on credit and debit cards in July.

The local currency climbed to 4.7517 Chinese yuan from 4.7365 yuan yesterday after figures showed China’s imports fell 12.5 percent in July from a year earlier. The kiwi edged down to 93.26 Australian cents from 93.42 cents and rose to 73.08 yen from 72.55 yen.

It gained to 54.71 British pence from 54.35 pence yesterday and increased to 64.39 euro cents from 64.06 cents.

(BusinessDesk)

BusinessDesk.co.nz

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