NZ dollar little changed ahead of RBA, Fed minutes, US jobs data

Monday 3rd July 2017

The New Zealand dollar was little changed ahead of key events this week including the Reserve Bank of Australia's interest rate review and the minutes of the last Federal Reserve meeting.

The kiwi traded at 73.17 US cents as at 5pm in Wellington versus 73.16 US cents at 8am and 73.32 cents on Friday in New York. The trade-weighted index was at 78.36 from 78.25 last week.

"Over the day, we had a little bit of US dollar strength and that's taken some of the gloss off the kiwi," said Ross Weston, a senior trader at Kiwibank. He noted that normally light Monday trading was exacerbated by the US Independence Day holiday in the U.S. on Tuesday.

Investors' attention will now shift to the Reserve Bank of Australia's rate decision and statement Tuesday with the "market all hyped up" about the possibility it could sound a more hawkish tone, following on from a raft of central bankers last week, said Weston. Markets have been volatile in the wake of hawkish comments from European Central Bank President Mario Draghi, Bank of England Governor Mark Carney and from top policy makers at the Bank of Canada.

While Australia's employment numbers look more solid and while iron ore prices have recovered strongly, Weston doesn't expect the RBA to change its stance as it won't want to stoke its currency.

Domestically, investors will be watching for the New Zealand Institute of Economic Research's quarterly survey of business opinion tomorrow followed by the Global Dairy Trade auction. The NZX Dairy Derivatives market expects dairy commodity prices to ease at the July 4 event, with the exception of whole milk powder, which is expected to see a reasonably flat result.

Weston said, however, minutes from the Federal Reserve's policy meeting and the June jobs data out of the U.S. will be key for direction.

The kiwi was at 95.34 Australian cents from 95.28 cents on Friday in New York. It fell to 4.9642 Chinese yuan from 4.9706 yuan.

The local currency traded at 64.10 euro cents from 64.15 cents last week and was little changed at 56.29 British pence from 56.27 pence and traded at 82.33 yen from 82.38 yen last week.

Warren Potter, a portfolio manager at AMP Capital Investors, said the US Fed minutes and jobs data would also be key for swap rates. If the jobs data is stronger than expected and if wage data points to some inflationary pressure "that will potentially kick start a further sell-off in rates," he said.

New Zealand's two-year swap rate rose four basis points to 2.36 percent while the 10-year swap rate rose seven basis points to 3.41 percent.

(BusinessDesk)

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