NZ dollar heads for 0.5% weekly gain; RBNZ viewed as slightly more hawkish

Friday 10th November 2017

The New Zealand dollar is heading for a 0.5 percent weekly gain, helped by a Reserve Bank statement that was deemed slightly more hawkish.

The kiwi traded at 69.38 US cents as at 5pm in Wellington from 69.52 cents yesterday and from 69.05 cents a week ago. The trade-weighted index was at 73.55 from 73.82 yesterday.

The New Zealand dollar got a lift from the Reserve Bank's new forecast track for the official cash rate, which brought forward the chance of a hike to June 2019 on a higher inflation track.

Globally, investors are keeping an eye on political developments in Saudi Arabia as "that drama still has a few chapters to it," said Sheldon Slabbert, a trader at CMC Markets. Concerns about the stability of Saudi Arabia, sparked after the purge of 11 princes and arrests of dozens of other influential figures since last week, are intensifying, according to Reuters.

Comments from Finance Minister Grant Robertson weighed on the kiwi, said Slabbert. Robertson told Reuters the next central bank governor must be willing to adopt his government's plan to include employment in the bank's mandate, and he was willing to reject any candidate who was not the "right person". He told Bloomberg that he plans to expand the Reserve Bank’s policy committee by adding three external members, dismissing comments by acting Reserve Bank Governor Grant Spencer that the committee should remain in-house.

Slabbert also said that if the US Federal Reserve continues on the path it has set out and the New Zealand central bank "sticks to its guns" and doesn't lift rates until June 2019 it means the rate differential will move in favour of the US dollar. Against that backdrop "it's difficult to see the kiwi regain and hold 70 cents," said Slabbert. "For me, it's time to be a bit more defensive (in trading). It's more about protecting what you've got," he said.

The local currency fell to 4.6046 Chinese yuan from 4.6102 yuan yesterday and fell to 90.23 Australian cents from 90.52 cents. It dropped to 52.76 British pence from 52.97 pence yesterday and slipped to 59.54 euro cents from 59.97 cents. The kiwi fell to 78.66 yen from 79.26 yen yesterday.

New Zealand's two-year swap rate was unchanged at 2.20 percent while 10-year swaps rose two basis points to 3.20 percent.

(BusinessDesk)

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