New Zealand dollar continues to make headway vs greenback, Trump inauguration in focus

Friday 20th January 2017

The New Zealand dollar continued to gain against the US dollar today as the greenback slipped ahead of US president-elect Donald Trump's inauguration.

The local currency rose to 72.14 US cents as at 5pm in Wellington, from 71.67 cents at 8am and 71.38 cents late yesterday. The trade-weighted index advanced to 78.90 from 78.31.

"The kiwi made big changes overnight and that continued into Asia," said Stuart Ive, senior dealer foreign exchange at OMF in Wellington. Ive said markets in general are a "mixed bag" as people position ahead of Trump taking office. "He and his policies will be the focus for markets next week," he said. "We won't see any real direction until we get some more clarity from the Trump administration. Trump's inauguration will include his speech to the nation, which may provide an update on his policy plans for the world's biggest economy."

The kiwi got a further lift today after comments from Federal Reserve chair Janet Yellen who was "not so upbeat about US rate hikes. She was more measured," said Ive. Among other things, Yellen said she doesn't see the US economy at risk of overheating.

News that China's industrial output eased in December while the economy accelerated slightly in the fourth quarter, however, had little impact on the kiwi. Ive said the main event risk, aside from any news out of the US, will be next week's inflation data, due Thursday in New Zealand. Economists expect inflation was 0.2 percent in the final three months of 2016 for an annual rise of 1.2 percent, according to the median in a BusinessDesk poll. If the data pans out it will mark the first time inflation is back in the Reserve Bank's 1 percent-to-3 percent band in more than two years.

The kiwi rose to 82.62 yen from 81.78 yen this time yesterday and to 95.08 Australian cents, from 94.92 cents.

The kiwi also gained against the British pound, trading at 58.30 pence from 58.13 pence late yesterday. Against the euro, it rose to 67.46 euro cents from 67.11 cents.

It also pushed higher against the Chinese yuan, gaining to 4.9501 yuan from 4.8940 yuan.

New Zealand's two-year swap rate rose 3 basis points to 2.41 percent, while 10-year swaps rose 5 basis points to 3.46 percent.

BusinessDesk.co.nz

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