NZ dollar falls vs. greenback, Australian dollar as Chinese stocks rise, RBNZ looms

Monday 7th September 2015

The New Zealand dollar fell against the greenback and the Australian dollar as Chinese stocks rose after national holidays and as traders look ahead to the Reserve Bank's policy review on Thursday, amid expectations of an interest rate cut.

The kiwi fell to 62.64 US cents as at 5pm in Wellington, from 62.77 cents at the New York close on Friday. The local dollar fell to 90.48 Australian cents from 91.25 cents on Friday. The trade-weighted index slipped to 68.52 from 69.27 on Friday.

China's Shanghai Composite Index was recently up 0.9 percent, after fluctuating when the market opened today, after being closed for four days. There had been concerns that a stock market slump that had wiped almost US$5 trillion of the value of Chinese stocks since June would continue, signalling a slowdown in one of the biggest export markets for New Zealand. At home, traders have put 78 percent odds of governor Graeme Wheeler cutting the official cash rate a quarter point to 2.75 percent and are looking for clues to further cuts.

"More and more people are saying they expect the situation in China to stabilise," said Mitchell McIntyre, senior dealer at NZForex. "I think everyone is going to start to come round and see the kiwi at value here", although the prospect of US rate cuts is weighing on the currency.

A rate cut on Thursday "is largely priced into the kiwi dollar - regardless of what the RBNZ does , I don't think we will see a great deal more downside for the kiwi from here," McIntyre said.

The kiwi may trade between 61 US cents and 65 cents this week, according to a BusinessDesk survey of 13 currency analysts today. Six see the kiwi rising, six say it will probably drop while one expects it to remain largely unchanged. It recently traded at 62.74 US cents.

Traders are split on whether the US Federal Reserve will raise interest rates for the first time since 2006 at its Sept. 16-17 meeting amid concern about global growth. US employment data published on Friday showed the world's largest economy added 173,000 jobs in August, lagging behind expectations for 217,000, although economists speculated the data may later be revised higher in line with previous years. Data for the previous two months was revised up, average hourly earnings increased more than expected and the unemployment rate dropped to 5.1 percent, which is in line with the Fed's view of the long-run equilibrium rate.

The kiwi fell to 56.22 euro cents from 57.14 cents and declined to 41.25 British pence from 41.76 pence. The currency dropped to 74.79 yen from 75.86 yen and sank to 3.9899 yuan from 4.0424 yuan.

The two year swap rate rose 1 basis point to 2.80 percent and 10 year swaps rose 1 basis point to 3.61 percent.

BusinessDesk.co.nz

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