NZ dollar gains after Fed minutes show concern at greenback strength

Thursday 23rd February 2017

The New Zealand dollar rose after minutes of the US Federal Reserve's latest meeting showed concern that a strong greenback could hurt the US economy while some comments appeared to downplay any near-term inflation risks.

The kiwi rose to 71.79 US cents as at 8am in Wellington from 71.64 cents late yesterday. The trade-weighted index edged up to 78.15 from 78.07.

Minutes of the Federal Open Market Committee’s latest meeting showed officials saw the need to raise interest rates "fairly soon" provided labour market data and inflation were in line or stronger than expectations or there was a risk of overshoot. The tone of the minutes was somewhat more dovish than some market participants had expected, especially given recent comments from chair Janet Yellen and other Fed officials that indicated a rate hike in March was possible.

"US data is likely to provide most of the swings in the near term but the underlying story of an outperforming, stable New Zealand economy continues to support the currency," said Sharon Zollner, senior economist at ANZ Bank New Zealand, in a note before the release of the minutes at 8am Wellington time.

The kiwi actually extended its gains after following an announcement from Fonterra Cooperative Group that it was maintaining its milk payout forecast at $6 per kilogram of milk solids. Some forecasters had been expecting an increase.

The kiwi traded at 93.22 Australian cents from 93.14 cents. It rose to 57.64 British pence from 57.33 pence and traded at 68 euro cents from 67.94 cents. The kiwi fell to 81.20 yen from 81.29 yen and rose to 4.9421 yuan from 4.9295 yuan.

BusinessDesk.co.nz

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