NZ dollar drops to 4-week low after hawkish Fed comments, Syria attack

Monday 10th April 2017

The New Zealand dollar fell to its lowest level in almost four weeks after New York Fed President William Dudley said he didn't expect the central bank to delay raising interest rates in order to shrink its balance sheet.

The kiwi dropped to 69.31 US cents as at 8am in Wellington from 69.34 cents in late New York trading on Friday, when it fell as low as 69.26 cents, the lowest since March 15. The trade-weighted index declined to 75.76 from 77.

US non-farm payrolls showed the US economy added a much lower-than-expected 98,000 jobs in March against expectations of a 180,000 gain and while the data had been seen as a major risk event for the week, the market didn't see much risk in the actual numbers and took more from Dudley's comments. He said any efforts to reduce the bank's US$4.5 trillion balance sheet would only require a "little pause" in the rate hike cycle, clarifying earlier comments which had referred to a pause. The foreign exchange market already had a risk-off tone from the US missile strikes on Syria, which it has since indicated were a one-off.

"US interest rates and the US dollar closed higher, brushing off a disappointing payrolls report but sensitive to some hawkish Fedspeak," said Imre Speizer, senior markets strategist at Westpac Banking Corp. "The weakness in (US) job gains was pronounced in services, and hours worked were revised lower, which may reflect the survey week’s adverse weather," he said. "Overall, one-off factors are likely at play here, suggesting the Fed will treat the results with caution."

The kiwi traded at 76.97 yen from 77 yen late on Friday in New York and at 92.44 Australian cents from 92.40 cents. It traded at 65.47 euro cents from 65.46 cents and slipped to 55.96 British pence from 56.03 pence. The kiwi was little changed at 4.7809 yuan from 4.7829 yuan.

(BusinessDesk)

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