NZ dollar loses sheen as Aust growth weighs, still firm on heightened North Korean tensions

Wednesday 6th September 2017

The New Zealand dollar eased slightly after economic growth across the Tasman was slightly disappointing although ongoing tensions in the Korean Peninsula kept it from losing too much ground.

The kiwi traded at 72.25 US cents as at 5pm versus 72.38 US cents as at 8am in Wellington, and up from 71.69 cents late yesterday. The trade-weighted index gained to 75.42 from 74.93 late yesterday.

The New Zealand dollar got a solid lift overnight after Federal Reserve governor Lael Brainard said inflation was below the central bank's target, suggesting little need to rush to hike interest rates. Ongoing tensions in the Korean Peninsula also weighed on the US dollar, helping shore up the kiwi.

"It's largely holding onto the gains from last night but it's not running any further. It's stalled at those levels," Westpac Banking Corp senior strategist Imre Speizer said.

One of the things holding it back today was Australia's second-quarter gross domestic product data. The economy expanded 0.8 percent in the second quarter, accelerating from a 0.3 percent pace in the first quarter. Economists, however, had rejigged their forecasts after a raft of positive data in recent days and the number came in slightly lower than expected, Speizer said. Economists had been tipping growth of 0.9 percent. The data also underscored very little inflationary pressure.

"The Aussie fell back on that and the kiwi fell in sympathy," he said. The kiwi rose to 90.52 Australian cents from 90.01 cents yesterday.

Looking ahead, investors will be watching for any commentary out of the European Central Bank overnight about when it might start winding down its 2.3 trillion euro stimulus programme. They will also continue to keep a close eye on developments around North Korea.

The kiwi traded at 78.53 yen from 78.39 yen and gained to 60.64 euro cents from 60.20 cents. It traded at 55.43 British pence from 55.42 pence and increased to 4.7226 yuan from 4.6854 yuan.

The two-year swap rate fell 4 basis points to 2.11 percent while the 10-year swaps fell 8 basis points to 3.03 percent.

(BusinessDesk)

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