NZ dollar ends week down 1.7% as all eyes on Fed

Friday 10th March 2017

The New Zealand dollar remained out of favor Friday, falling 1.7 percent on the week against the greenback as markets gear up for a rate increase from the U.S. Federal Reserve.

The kiwi dollar was trading at 69.10 US cents as a 5 pm versus 69 cents late yesterday and 70.30 early Monday. It also eased 1.3 percent on a trade-weighed index basis over the week and was trading at 75.94.

"The kiwi has held about that 68.90 US cents level, helped by some exporter buying," said Tim Kelleher, head of institutional foreign exchange sales for ASB Bank. Domestic data was largely overlooked with markets waiting for US jobs data later in the global trading day with investors expecting an addition of 200,000 non-farm payrolls. If that data is as expected or better and the Federal Reserve is "reasonably hawkish" at its rate review next week, the Kiwi might fall further. However, given that the market is widely expected a Fed rate increase next week and at least two more hikes this year, the kiwi is unlikely to plunge.

Kelleher noted the kiwi has traded in a 68.50 US cents to 73.50 US cents range for the past six months and said it is unlikely to break out of it just yet.

Kelleher underscored the only story right now is the US dollar story. Even the euro failed to really fire after ECB President Mario Draghi said further measures to support the Eurozone's economic recovery and boost inflation are becoming less likely. "I was surprised it didn't spike higher on that but it's all US dollar dominated right now," said Kelleher.

The kiwi was trading at 91.91 versus 91.86 Australian cents and at 4.7740 Chinese yuan from 4.7758 yuan yesterday. It was at 56.81 British pence from 56.75 pence yesterday and was at 79.58 yen versus 79.02 yen.

The two-year swap rate was unchanged at 2.31 percent and 10-year swaps rose 4 basis points to 3.60 percent.

BusinessDesk.co.nz

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