NZ dollar slips as greenback's rally seen to be enduring, US bond yields remain high

Wednesday 23rd November 2016

The New Zealand dollar fell on expectations the US dollar will extend its post-election rally, which has helped push up US bond yields and propelled US equity markets to record highs.

The kiwi dollar fell to 70.47 US cents as at 8am in Wellington from 70.78 cents late yesterday. The trade-weighted index fell to 77.55 from 77.79.

The US Federal Reserve is scheduled to release the minutes of its last policy meeting tonight and traders expect them to show confidence that inflation is returning to 'normal levels' as the US economy expands, making an interest rate hike in December a near-certainty. The greenback has rallied in the wake of Donald Trump's US presidential win on the prospect of big federal spending and tax cuts that will stimulate the world's biggest economy.

"The US dollar has had an impressive rise since the US election and has potential to rise further, not least because the Fed will probably hike in December," said Imre Speizer, currency strategist at Westpac Banking Corp, giving his view of the kiwi dollar's track against the greenback in the next three months. "Against that, the NZ economy is strong and dairy prices have risen. Overall we are left with a bearish outlook for NZD/USD, targeting sub-0.70 (US cents)" with technical charts suggesting it could sink as low as 66 US cents, he said.

With little domestic economic news scheduled, traders are now awaiting figures for Australian construction work for the third quarter, which is expected to show a 1.6 percent decline, from a 4 percent decline three months earlier. The kiwi declined to 95.31 Australian cents from 95.65 cents yesterday.

The kiwi fell to 4.8581 yuan from 4.8775 yuan and traded at 78.42 yen from 78.36 yen. It rose to 56.85 British pence from 56.67 pence and slipped to 66.39 euro cents from 66.60 cents.

BusinessDesk.co.nz

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